Govt delivered on fisc, ball now in RBI court: FM

Says for monetary policy review, RBI will take into account economic situation and the numbers coming out between now and March 19

Amid expectations of a softer monetary stance by the Reserve Bank of India later this month, Finance Minister P Chidambaram on Friday said his ministry had delivered on fiscal consolidation and it was now up to the former to take a decision on a rate cut.

"That is a call RBI will take. As far as the government is concerned, we promised we will work towards fiscal consolidation. We have delivered on the path, chalked out by the Kelkar committee," Chidambaram told reporters when asked whether there would be a policy rate cut by the central bank.

At a press conference after the customary post-Budget meeting with the RBI board, he said the central bank would take into account the overall economic situation and the numbers coming out between now and March 19, when a monetary policy review is scheduled.

Earlier in the day, the Prime Minister's Economic Advisory Council chairman, C Rangarajan, said a rate cut would depend on the inflation scene. He was speaking at the International Chamber of Commerce (ICC) Asia Pacific CEO Forum 2013 here.

The important data still to come before March 19 are the Index of Industrial Production (IIP) for January and the wholesale price and consumer price-based inflation for February. The IIP numbers will give some indication on whether the economy is reviving or not, after economic growth dipped to an almost four-year low of 4.5 per cent in the third quarter of 2012-13.

The inflation numbers give a contrasting picture on the rate of price rise. Wholesale price inflation fell to its lowest level in three years at 6.62 per cent in January against 7.18 per cent the previous month. However, retail price inflation rose to a record of 10.79 per cent in January since the new index’s inception a year earlier. It stood at 10.56 per cent in the previous month.

Armed with fuel price corrections, the Budget pegged the Centre's fiscal deficit at 5.2 per cent of GDP for the current financial year, slightly higher than the 5.1 per cent pegged in the last year’s estimate but slightly lower than the 5.3 per cent projected in the revised fiscal consolidation road map of the ministry.

For the next financial year, the government has stuck to the said map by projecting the fiscal deficit at 4.8 per cent of GDP. Chidambaram said the government would borrow Rs 10,000 crore more than last year on a gross basis and Rs 5,000 crore on a net basis.

There was some confusion over the amount of market borrowing in the Budget for 2013-14. In the receipt budget, the amount was shown as Rs 6.29 lakh crore. The ministry later clarified the gross market borrowing was pegged at a little over Rs 5.69 lakh crore, as Rs 50,000 crore relates to buyback and switching of securities. For the current financial year, the revised estimate pegs gross market borrowing at Rs 5.58 lakh crore.   

To a query, the minister said the government had not asked RBI to clarify the guidelines on new bank licences. "I  think the demand for review has come from the private sector. What RBI has put out is clear to us," he said.  

Yesterday, RBI had said  it would issue clarifications on the final guidelines. Many entities and groups interested in joining the banking fray had been posting queries since the guidelines were made public on February 22, it said. Rangarajan said RBI would take a final decision on allowing companies with real estate operations to apply for banking licences. “It is a question of deciding who are fit  and open. Who will they (RBI) give a licence to will depend upon a number of factors," he said.