Indian Economy Prepared to face any global threat: Financial Stability and Development Council

BENGALURU: In a Financial Stability and Development Council (FSDC) meeting chaired by finance minister Arun Jaitley, it was concluded that India is in a prepared state for managing any vulnerabilities coming from external sector. The subject of the meeting was to discuss India’s preparedness for emerging from Brexit and its consequences. FSDC was set up in December 2010, and all the financial regulators, secretaries of finance ministry and chief economic advisor are its members. The institution was formed to strengthen and institutionalize the mechanism for maintaining financial stability, enhance inter-regulatory coordination and promote financial sector development.

"Members agreed on the need to continue to be in a state of preparedness for managing any external sector vulnerabilities, including those emerging from Brexit and its consequences," told the finance ministry.

According to an Economic Times source, continuous monitoring of the situation developing from Brexit has been called for by the FSDC and the members who are addressing the issue have been cautioned against any complacency. The measures taken by the government and the central bank to handle the stressed assets were reviewed by FSDC. Also ways in which the situation would be managed was discussed. Improving the overall performance of public sector banks, making stalled projects functional and economically viable and increasing private sector investment were identified as the major challenges before the central government today by Jaitley. "The Council also discussed issues relating to developing a comprehensive framework for identification of Systematically Important Financial Institutions (SIFIs) across all sub-sectors of financial sector," said the statement.

The steps taken by RBI on the issue of maturity of concessional swaps of 2013 against FCNR deposits during September-December 2016 were also noted down by the FSDC. According to the institution these may be some kind of financial market volatility due to this outflow. An overview of the state of macro-economy which highlighted the important issues was given by Chief Economic Adviser, Arvind Subramanian.

The council gave the option that India is "much better placed" on back of improvement in macro fundamentals, slew of reforms and large forex reserves as the global economy is uncertain and there is high volatility in financial markets. The statement released after the meeting said, “The Council noted that uncertainty in global economy and high volatility in the financial markets are prominent risks confronting the emerging market economies. India however appears to be much better placed today on the back of improvement in its macro-economic fundamentals, recent financial sector reforms by government and large forex reserves, which provides cushion against financial market volatility.”

A good monsoon is expected to further strengthen growth in India as there has been a sentiment revival and some signs that the industrial activity would pick up which was at 7.6% in 2015-16. Reportedly, this was the fastest rate of expansion among major economies.

FSDC also looked upon a brief report on the activities undertaken by the FSDC sub-committee chaired by RBI governor. The meeting was also attended by finance secretary Ashok Lavasa, economic affairs secretary Shaktikanta Das and financial services secretary Anjuly Chib Duggal.

Other dignitaries who were present at the meeting included RBI governor Raghuram Rajan, Sebi Chairman U K Sinha, IRDAI Chairman TS Vijayan and PFRDA Chairman Hemant G Contractor.

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