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On a day the finance minister used his packed schedule in the country’s commercial capital to build confidence about the economy, he also said the financial regulators should simplify the know-your-customer (KYC) requirements and make those uniform.
The minister also dismissed the Central Statistics Office’s (CSO’s) growth projection, saying the economy was already seeing green shoots and was likely to grow at a higher rate of 5.5 per cent this financial year. It could improve to 6-7 per cent in 2013-14.
He asked banks to improve their operational efficiency to bring down interest rates and hand-hold companies facing financial stress. Banks should give impetus to consumer loans, especially home and educational ones and put pressure on builders to cut prices as a step to push demand, he said during an interaction with senior State Bank of India executives.
He also said it would be difficult to retain the current employment levels if the economy did not return to seven per cent growth. “For India, eight per cent growth rate is imperative — seven per cent to retain the existing employment level and eight per cent to absorb new people,” he said.
He made his displeasure with the CSO estimate clear by saying the calculations used were not accurate. “I know all of us are concerned about the low growth reported by CSO. Many in the government believe the data, based on the which CSO projected a growth rate of five per cent is dated,” he said.
Chidambaram said the economy was beginning to see an upturn, albeit at a very slow pace. “It is not a V-shape upturn. It is a very long and shallow U. In the second half of this year, there are indications of green shoots in the economy. Going forward, we believe it will return to 5.5 per cent,” he said.
Chidambaram, who formally launched RGESS in a separate function organised by BSE, said different sets of regulations to invest in financial products were putting off investors.
“We have too many regulations. It is important KYC norms for all intermediaries under a market regulator converge and become one set of norms. We cannot have multiple KYC norms for intermediaries and participants under one regulator. And worse, different sets of norms between different regulators,” said Chidambaram.
He asked regulators to make attempts to prevent a crisis rather than act after one broke out.
“The crisis of 2008 can be attributed to the fact that the innovators remained one step ahead of the regulators. I would urge regulators remain a step ahead of innovators. If innovators employ two nerds, regulators must employ three,” he said.
