India's financial sector is sound: Finance Commission chief

Monday, 20 July 2009, 22:06 IST
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Hyderabad: India's financial sector is sound and the government is closely monitoring the evolving macro-economic situation, Vijay Kelkar, chairman of the 13th Finance Commission, said here Monday. He was speaking at a meeting with Andhra Pradesh Chief Minister Y.S. Rajasekhara Reddy and state government officials. "Inflation is under control; the balance of payments position also continues to be sound. The government has shown its willingness to enact significant monetary, fiscal and sectoral policy measures to minimise the negative impact (of the global crisis) on the real economy," Kelkar said. On the international front, India is actively coordinating policy action with other countries for reform of international financial institutions as well as improved regulation and supervision of global finance. Recent forecasts are for around 6.7 percent growth in 2008-09, down from 9 percent in 2007-08. "The fact that we are on a somewhat sounder fiscal footing than had been the case historically has allowed the government significant elbow room to act to contain the fallout of the crisis," Kelkar claimed. Stating that the pause on the road to fiscal reform is temporary, he wanted the central and state governments to resume medium-term fiscal reform. The chairman added that the Fiscal Responsibility and Budget Management (FRBM) legislation had helped the central and state governments reduce deficits last fiscal. The Reserve Bank of India projects a revenue surplus for all states at 0.54 percent of the gross domestic product (GDP) in 2008-09 in contrast to a revenue deficit of 2.3 percent in 2002-03, Kelkar said. During the same period, the fiscal deficit has reduced to 2.1 percent of GDP from 4.1 percent the year before.
Source: IANS
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