Press Trust of India
Bangalore, 5 October: Asserting that the government has the capacity to overcome “this period of stress”, Union finance minister Chidambaram today said the current account deficit will be contained below USD 70 billion this fiscal.
“Last year I was told by pundits, analysts and rating agencies and all the wise people who appear on televisions every day that we cannot contain the fiscal deficit.
“I’m happy that we were able to surprise them ~ We are told that the government cannot contain the current account deficit, I said last year we had the deficit of USD 88 billion, this year I’m betting at USD 70 billion, and I will contain it below 70 billion,” he said at a State Bank of Mysore event here.
“Let me tell you, I will surprise them once again, we will contain it below USD 70 billion. I say this because we have intellectual capacity among our senior economists and administrators, we have the institutional capacity and above all we have our people who give us the confidence to overcome stress,” he said.
Stating that “Our people save and that is a biggest asset to us”, Mr Chidambaram said, “people of India save like no other people anywhere in the world, in worst of times our savings ratio did not go below 30 per cent.”
“If those savings are channelised into productive investment and if we create a climate where people can take risk, I have no doubt in my mind that we will be able to get over this period of stress.”
Asking people to be confident, he said “this year our growth will be better than last year, and next year we should move to a growth close to between 6-7 per cent and in the year after that we must discover our true potential growth rate of 8 per cent.”
Answering a question about his confidence in controlling the CAD, he said “The confidence comes from my knowledge of the numbers, from the fact that gold imports have sharply compressed in the month of July, August and September, exports have picked up briskly and smartly.”
“Only yesterday the Governor (of RBI) said he has got USD 5.6 billion of FCNRB accounts, so I’m confident and I want you to share my confidence,” he added.
While stating that people were facing the burden of high prices, Mr Chidambaram said, “We don’t fix the price of crude oil, it is fixed by someone else-we have to import most of it as per requirement. There is also burden of inflation-as international commodity price rise ~ ”
“ ~ There could be inflation, I know you bear burdens, but even while you bear the burdens I want you to reflect that certainly India today is much larger economy than what it was 10 years ago, what it was in 1991.”
“ ~ We don’t make these crises, these crises are made elsewhere. We have to deal with the consequences of this crisis,” he said.
He said the country has dealt with it in the past and that the situation today is no worse than what it was in 1991 or 1997 or 2008.
“We will get through this period of stress by emphasising on the fundamentals of the economy and doing the basic right things.”
“We have to take the steps one by one-contain inflation, provide credit to sectors that require credit, unblock the stalled projects-get them growing, see to it that investment takes place, production and supply increase to meet the demand, and bring more and more people into the system,” he said.
The finance minister also asked the banks not to be a clone of another bank. “We don’t want clones, each bank must have its own culture, its own philosophy and should serve people in its own way.”
“Reserve Bank will shortly issue licences to few more banks. I’m happy that the Governor has spoken about differentiated banks. We don’t want more clones- we want each one of them to cater to the needs of special group of customers who don’t have banking today,” he said.
Mr Chidambaram said there would there be competition, efficiency and progress if people attempt different things and do things differently.
“I sincerely hope that when the RBI grants new licences, they will underline the fact that each licence is different from the other and each bank that is coming into being will be different from the banks that we have today.”
He said: “for long time we have harboured the myth that banks are meant to provide money to rich people and to corporate ~ nowhere in the world do corporate’s come to the banks for working capital, it’s only in India where large corporates come to a bank for working capital and banks lend them money.”
“A corporate should go to market to get working capital. Banks are meant to serve largely poor and middle class. Individual customer needs bank more than a corporate,” he said.
Stating that the poor in India are bankable, honest and good borrowers, the finance minister said, “I’m happy to say in comparison to the rich, the poorer India repay loans much better.” “I would urge banks to shift the focus towards poor and the middle class, so that corporates are forced to go to the market-that is where they should go.”