The Financial Stability and Development Council (FSDC) on Tuesday discussed measures that may be needed to support the financial sector for achieving faster real economic growth and achieving the overall macroeconomic targets. Finance Minister Nirmala Sitharaman chaired the FSDC meeting, which was attended by financial sector regulators and senior government officials, via videoconference.
Budget proposals submitted by the Reserve Bank of India and other regulators were discussed at the meeting. The FSDC observed that the economy has gained momentum and the path to recovery will be faster than what was predicted earlier. But “there is a need to keep a continuous vigil on the financial conditions that could expose financial vulnerabilities in the medium and long-term,” it noted
“The meeting reviewed the major macroeconomic developments and Financial Stability issues (global and domestic) with special reference to vulnerability related issues and noted that the policy measures taken by the Government of India and the financial sector regulatory authorities have ensured faster economic recovery as reflected in the reduced contraction of GDP in Q2 of 2020-21,” the Finance Ministry said in a statement.
The economy shrank for the second straight quarter through September, recording a 7.5 per cent contraction in its GDP, compared to the unprecedented 23.9 per cent year-on-year contraction in April-June. There are expectations that in the FY22 Budget, the Centre will step up capital expenditure to support growth.
“Our emphasis is on economy. We are going to see improved economic conditions in the current year. Having said that, let me say it has been a very very difficult year … our emphasis would be to see that next year how much of the economy can be repaired and we go back to a robust economic growth,” Department of Economic Affairs Secretary Tarun Bajaj said at a Ficci meeting last week.
Finance Secretary Ajay Bhushan Pandey, Department of Financial Services Secretary Debasish Panda, Chief Economic Adviser Krishnamurthy Subramanian, RBI Governor Shaktikanta Das, Securities and Exchange Board of India Chairperson Ajay Tyagi, Insurance Regulatory and Development Authority of India Chairperson Subhash Chandra Khuntia, Pension Fund Regulatory and Development Authority Chairperson, Supratim Bandyopadhyay and other officials attended the meet.
The Council also discussed challenges involved in smooth transition of London Interbank Offer Rate (LIBOR)-based contracts. LIBOR, on which many interbank contracts and rates are based, is being replaced.
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