JOIN USUnion Finance Minister P Chidambaram on Thursday urged scheduled banks to pass on the benefits of policy rate cuts to their borrowers and also stressed on curbing the fetish for gold investments saying higher imports of gold is fuelling the widening current account deficit (CAD).
Addressing a conference organised by Indian Banks Association here, Chidambaram said, “Since 2012, the Reserve Bank of India cut repo rate by 125 basis points (bps). However, banks have reduced their rates only by 30 bps.” He expressed serious concern over the CAD and blamed increasing gold imports for much of the problem.
He informed that while on an average 70 tonnes of gold was imported in a month during 2012-13, the monthly gold imports have doubled during the current fiscal. So, the minister strongly discouraged the practice of investing in gold and also asked banks not to promote the sale of gold coins, saying, “Gold is like any other metal, it only shines a bit more than copper or glass.”
The Finance Minister expressed confidence that fiscal deficit target of 4.8 per cent during 2013-14 can be achieved easily. “We have been able to lower the fiscal deficit from 5.3 per cent to 4.9 per cent. This has been achieved through substantial fiscal tightening in the second half of last year,” Chidambaram said, adding that the government hopes to achieve the fiscal deficit target without compressing expenditure, but by expecting investments to pick up in the remaining three quarters of the year.
Chidambaram also said there is no cause for concern over the fall of the Indian Rupee as the capital inflows were strong. “I think the rupee will stabilise and find its correct level,” he told reporters on the sidelines of the IBA AGM.
On the current GDP growth, Chidambaram admitted that 5 per cent growth is low and is not acceptable.
Though this rate is being termed the lowest in a decade, he pointed out that the Indian economy registered its lowest growth of the new century during 2001-02 and 2002-03, at 4.8 per cent and 4 per cent, respectively. “We are not satisfied with the growth picture, but there is hope,” he added.
Chidambaram said it is a matter of relief that the wholesale price inflation is falling and the consumer price inflation is also showing moderation.
Stalled projects
Stating that 215 major projects entailing a capital expenditure of Rs 7 lakh crore have been stalled, Chidambaram said that the government has set up a special committee to track them and will seriously work towards removing all bottlenecks. “I assure investors that each project will be tracked and the government will help see them through,” he said.
“As the inflation rate falls, there will be more disposable income with people, which will lead to growth in deposits with banks, as the current interest rates are attractive,” he said.