Reserve Bank of India (RBI) Governor Y V Reddy said on Monday that any easing of money supply through mandatory deposits of banks would depend on the country’s fiscal situation, which still faces some “underlying pressures”, and liquidity conditions. “Further movement of CRR depends on liquidity conditions,” he said.On the fiscal situation, Reddy said, “Currently, the Centre’s fiscal situation has improved, but I think several underlying fiscal pressures are not entirely evident in the numbers.” He pointed out that India’s fiscal deficit, public debt and external debt as a proportion of GDP are one of the highest in the world, prompting The Economist magazine to rate the country one of the three riskiest emerging economies.The RBI governor pointed out that the fiscal situation of the states too had improved significantly. However, the numbers of the fiscal deficit here, too, do not factor in some underlying pressures, though not as much as the Centre’s. He noted that the fiscal deficit accounts for half of the total household savings in the country.Reddy spoke of underlying pressures but did not specify whether the pressures the economy was facing included the rising global crude oil prices that has touched $135 a barrel. India’s fiscal deficit is estimated to fall to 2.5 per cent of GDP in 2008-09 against 3.1 per cent in the previous fiscal.
