Union finance minister Pranab Mukher jee admitted here today to a mood of diffidence.
“We are suffering from lack of confidence. There is slowdown in legislations to give shape to our reform agenda,” he said at an Assocham Banking summit here. “There has been some slowdown in certain important legislations.”
ON GDP GROWTH
The government “does not expect much improvement” in the growth of gross domestic product in the second quarter of the ongoing financial year, Mukherjee said.
“Again, growth has started decelerating,” Mukherjee noted. “In the first quarter, we have seen growth of 7.7 per cent. In the second quarter, I do not see much improvement. Perhaps from the third quarter onwards, there will be some improvement. But, surely, the growth will not be what I expected while presenting the Budget, which was nine per cent — plus or minus 0.25 per cent. It will be less than that.”
The 2011 financial crisis, he observed, was likely to create some adverse impact. “We will not hesitate to take tough decisions at an appropriate time.”
Mukherjee wondered how fuel prices were rising when there was no heavy demand foroil in the US and Europe. “The answer, perhaps, lay in the financialisation of the commodity,” he claimed.
The G-20 lenders have indicated an early solution to the sovereign debt crisis. “But I am not hopeful how quickly it will be done,” he added.
Earlier, Kaushik Basu, chief economic advisor in the finance ministry, said India would suffer a setback if Greece chose to part ways from the European Union.
That would lead to the stalling of its growth for about two years, he noted.
“The countries must resolve the crisis through credible assessment of their solvency,” Basu said. “They must take initiatives to find out a solution of their solvency, and supplementary finance can be worked out. Of course, it will impact our economy.”
DTC FROM NEXT FINACIAL
The Direct Taxes Code will be introduced in Parliament before the start of the next financial year, the minister said.
Standing committee on finance has approved three major Bills. This includes the PFRDA Bill and the amendment in the banking law, he pointed out.
We have got three major drafts approved from the standing committee of finances.”
CAPITAL INFUSION IN BANKS
The government will release Rs 5000 crore more for the capitalisation of public sector banks this financial year.
It has already released Rs 1,000 crore so far as a part of the Budget announcement to give Rs 6,000 crore to banks for improving their core capital.
The issue of capital adequacy gains importance in view of the credit growth required for an eight per cent GDP growth, the minister noted. “We have asked public sector banks to improve their efficiency and recovery, so that they have enough enough reserves to generate surplus and improve capital adequacy,” he added.
Mukherjee said the government was committed to infuse additional capital in public sector banks. “In 2011-12, I had announced a budget of Rs 6,000 crore to enable the PSBs to maintain a minimum tier-1 CRAR of eight per cent. We have already released Rs 1,000 crore; the balance will be released this financial year,” Mukherjee added.
