Abolition of subsidies, key to fiscal consolidation: Gokarn

The fiscal consolidation is a critical area in India's economy and controlling it also requires abolition of subsidies, which remains a key factor, Dr Subir Gokarn, Deputy Governor, RBI, has said. In his keynote address on ‘Assessment of the current economic situation” at the 154th annual general meeting of the Cochin Chamber of Commerce and Industry, he said the macro economic foundations for rapid growth are low and stable inflation, low fiscal deficit, low current account deficit and high investment.

Any variations in these factors could adversely affect the economic growth, he said. He said the present global conditions are volatile and uncertain and are likely to remain so. Domestically while growth is slowing, core inflation is also moderating. Even though the oil prices are providing some relief, the food inflation is likely to persist, he said. According to Dr Gokarn, liquidity is returning to normal. However quality of asset is a matter of concern, but it is not a threat. Currency dynamics resulting from a combination of global and economic factors, he said, adding that it is imperative to address domestic pressures. The slowdown in investment is to be viewed seriously and it is a matter of concern.

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