TOKYO, Oct 14: India’s Finance Minister called for the country’s central bank to take ‘calibrated risks’ to support the struggling economy as a reciprocal measure to government fiscal efforts.
In an interview with Reuters yesterday, P Chidambaram said the government was committed to ‘fiscal correction,’ a nod to rating agencies that have threatened to make India the only BRIC nation with a junk credit status, even accounting for recent economic reforms.
Mr Chidambaram was appointed in August to revive Asia’s third-biggest economy back to its former glory. After growing close to 10 per cent before the global financial crisis, years of policy inertia has slowed the rate of expansion to close to 5 per cent and a deep budget deficit has put the country’s credit rating in peril.
After loosening rules on foreign investment in retailing and airlines in a set of ‘big bang’ reforms to kick start a revival in the economy, Chidambaram said it was now the Reserve Bank of India’s (RBI) turn to take action.
“It’s a call that the RBI has to take,” Chidambaram told Reuters on the sidelines of an International Monetary Fund meeting in Tokyo, two weeks before the RBI is due to review policy.
“But I hope that the positives outweigh the negatives and that while the government has taken and will take a number of fiscal measures, that these measures will encourage the RBI also to take what I call some calibrated risks.”
(agencies)
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