Asserting that the government has the capacity to overcome "this period of stress", Union Finance Minister Chidambaram on Saturday said the current account deficit will be contained below USD 70 billion this fiscal.
Bangalore: Asserting that the government has the capacity to overcome "this period of stress", Union Finance Minister Chidambaram on Saturday said the current account deficit will be contained below USD 70 billion this fiscal.
"Last year I was told by pundits, analysts and rating agencies and all the wise people who appear on televisions every day that we cannot contain the fiscal deficit.
"I'm happy that we were able to surprise them; ....We are told that the government cannot contain the current account deficit, I said last year we had the deficit of USD 88 billion, this year I'm betting at USD 70 billion, and I will contain it below 70 billion," he said at a State Bank of Mysore event here.
"Let me tell you, I will surprise them once again, we will contain it below USD 70 billion. I say this because we have intellectual capacity among our senior economists and administrators, we have the institutional capacity and above all we have our people who give us the confidence to overcome stress," he said.
Stating that "Our people save and that is a biggest asset to us", Chidambaram said, "people of India save like no other people anywhere in the world, in worst of times our savings ratio did not go below 30 percent."
"If those savings are channelised into productive investment and if we create a climate where people can take risk, I have no doubt in my mind that we will be able to get over this period of stress."
Asking people to be confident, he said "this year our growth will be better than last year, and next year we should move to a growth close to between 6-7 percent and in the year after that we must discover our true potential growth rate of 8 percent."
Answering a question about his confidence in controlling the CAD, he said "The confidence comes from my knowledge of the numbers, from the fact that gold imports have sharply compressed in the month of July, August and September, exports have picked up briskly and smartly."
"Only yesterday the Governor (of RBI) said he has got USD 5.6 billion of FCNRB accounts, so I'm confident and I want you to share my confidence," he added.
While stating that people were facing the burden of high prices, Chidambaram said, "We don't fix the price of crude oil, it is fixed by someone else- we have to import most of it as per requirement. There is also burden of inflation- as international commodity price rise..."
"... There could be inflation, I know you bear burdens, but even while you bear the burdens I want you to reflect that certainly India today is much larger economy than what it was 10 years ago, what it was in 1991."
"....We don't make these crises, these crises are made elsewhere. We have to deal with the consequences of this crisis," he said.
He said the country has dealt with it in the past and that the situation today is no worse than what it was in 1991 or 1997 or 2008.
"We will get through this period of stress by emphasising on the fundamentals of the economy and doing the basic right things."
"We have to take the steps one by one- contain inflation, provide credit to sectors that require credit, unblock the stalled projects- get them growing, see to it that investment takes place, production and supply increase to meet the demand, and bring more and more people into the system," he said.
The Finance Minister also asked the banks not to be a clone of another bank. "We don't want clones, each bank must have its own culture, its own philosophy and should serve people in its own way."
"Reserve Bank will shortly issue licences to few more banks. I'm happy that the Governor has spoken about differentiated banks. We don't want more clones- we want each one of them to cater to the needs of special group of customers who don't have banking today," he said.
Chidambaram said there would there be competition, efficiency and progress if people attempt different things and do things differently.
"I sincerely hope that when the RBI grants new licences, they will underline the fact that each licence is different from the other and each bank that is coming into being will be different from the banks that we have today."
He said: "for long time we have harboured the myth that banks are meant to provide money to rich people and to corporate; ....Nowhere in the world do corporate's come to the banks for working capital, it's only in India where large corporates come to a bank for working capital and banks lend them money."
"A corporate should go to market to get working capital. Banks are meant to serve largely poor and middle class. Individual customer needs bank more than a corporate," he said.
Stating that the poor in India are bankable, honest and good borrowers, the Finance Minister said, "I'm happy to say in comparison to the rich, the poorer India repay loans much better." "I would urge banks to shift the focus towards poor and the middle class, so that corporates are forced to go to the market- that is where they should go."
To a question on infusing more capital into public sector banks than the amount announced in the Budget 2013-14, Chidambaram said: "That we will see. It will depend upon how much additional credit they will be able to provide to selective sectors at lower rates."
"Banks will be encouraged to lend more in certain selective sectors, at lower rates in order to boost demand.
"Let each bank come up with what it can do. Once we know what each bank can do, then we can aggregate the demand and calculate what additional capital is required and that additional capital will be provided," he said.
On the Supreme Court decision relating to Aadhar card, he said: "I think Supreme Court passed the interim order on the day of admission...Government has filed a detailed affidavit."
"....Only in the LPG, we have already identified the districts where it is being implemented today, 50,000 duplicate accounts and savings of these duplicate accounts is Rs 25 crore....
"I'm told some thing like 13 or 14 crore LPG connections...Assume that when it is rolled out across the country 1 crore accounts are found to be either false or duplicate accounts, (then) savings are huge," he said.
The Finance Minsiter said: "I think all these things are being explained in an affidavit to Supreme Court. I think Attorney General will be appearing in the matter.
"When all these matters are explained to the Supreme Court, I have no doubt that court will keep the larger public interest in mind and pass an appropriate order."
The Centre on Friday moved the Supreme Court seeking modification of an earlier order which said Aadhar card is not mandatory and no person should be deprived of any government schemes for want it.
On the NSEL fiasco, Chidambaram said "FTIL which is a promoter, MCX which is a commodity exchange and MCX-SX which is a equity exchange- all these three agencies are under the careful watch of the regulators namely SEBI and FMC. We will ensure operations of these three entities take place strictly in accordance with law."
"We have already appointed outside Directors on the board of MCX as well as MCX-SX. The inspectors of regulators are already examining the dealings of MCX and MCX-SX. We will ensure that the two exchanges - the commodity exchange and equity exchange - function strictly in accordance with law and there are no mal-reasons risk-reasons there."
"FTIL which is a promoter is under the watch both from the Ministry of Company Affairs and other two regulators." Chidambaram further stated that NSEL is a company and not a regulated entity. They are in court. We wish the depositors or lenders or investors, they should exercise and establish their rights in the court of law, and those who have committed any errors- I don't know- they will be answerable to those who have put their money."