PM's council meets, to keep tabs on inflation, jobs guarantee

Prime Minister Manmohan Singh's economic advisory council held its first meeting today. It decided to keep tabs on inflation, developments in the external sector and see how best to make the Employment Guarantee Act more effective.

It will also keep track of public finance issues, including tax reforms, subsidies and value-added tax "" which is to be introduced across the country from April 1.

"We have not decided today what issues to offer advise on, but the current trend in the price situation, some matters relating to taxation, ways to modify the employment guarantee scheme and make it more effective, and developments in the external sector will be considered. We may also give inputs in relation to the budget," said the council's Chairman, C Rangarajan after the meeting, held in the Reserve Bank of India (RBI) building here.

Today's meeting was also attended by former Director of Delhi School of Economics Suresh Tendulkar, Jawaharlal Nehru University Vice Chancellor GK Chaddha, NIPFP Director Govinda Rao and Icra Economic Advisor Saumitra Chaudhuri. All of them have been hand-picked by the Prime Minister.

"The objective of the meeting was to lay down procedures through which the council would advise the Prime Minister," Rangarajan told reporters.

The panel's terms of reference include providing the Prime Minister with periodic reports on domestic and international developments, advising on issues it considers relevant and on concerns raised by the Prime Minister himself, he added.

"We discussed what the monthly report should contain and how much emphasis should be placed on global and domestic developments, respectively," Rangarajan said.

He added that there was no precedents to go by. The point was to provide a report that helped the Prime Minister to assess situations.

For instance, "Growth and employment in the rest of the world impinge on the domestic economy. They are relevant for trade and investment prospects of the country," Rangarajan said, adding that on domestic indicators, the council would put together data and draw inferences which would be meaningful to policy makers.

"The matrix of safety fashioned in the early 1990s has changed. Preparedness of institutions to deal with risks has to be reworked," said Chaudhuri.

He added that while trade and economic growth in the coming days would be smooth, financial markets could be expected to be choppy.

The economic advisory council was constituted on December 29 to advise the Prime Minister on all economic developments, to monitor trends and suggest suitable policy response.

Meetings of the council have traditionally been held in the Planning Commission, next to the RBI building on Sansad Marg, here. The Planning Commission has provided the logistics for the panel.

However, as the present council has been constituted as a standing committee, which is yet to establish its own offices, the centrally located RBI building was chosen as a temporary venue.

Rangarajan also said that the work of the council was to offer advice and that it would play a complementary role to other bodies like the investment commission.

"The Planning Commission has many others tasks cut out for it. Our job is to offer a holistic view on various matters. We will be different in our approach to the problem," he said.