Finance minister Pranab Mukherjee on Friday met India’s top economic regulators seeking inputs on the macro economy and developments in the financial sector as preparation for budget 2011-12 entered the final leg.
Mukherjee’s meeting with members of the high-level Financial Stability Development Council (FSDC) came days ahead of the Reserve Bank of India’s (RBI’s) quarterly monetary policy review on January 25.
This was the second meeting of the high-level FSDC within a month. The first meeting was held on December 31, 2010.
“The RBI policy is scheduled on January 25. As a standard practice I have come to review the macroeconomic situation with the finance minister,” RBI governor S Subbarao told reporters after the meeting.
The RBI has raised key policy rates six times so far this year as prices raced into high-double digits pummelled by a supply crunch of staple items.
In November RBI had increased the repo and reverse repo rates each by 0.25 percentage points to 6.25% and 5.25%, respectively.
A higher repo, the rate at RBI lends to lenders, raises the banks’ borrowing costs prompting them to raise interest rates for final home, auto and corporate borrowers.
A higher reverse repo — the rate at which RBI absorbs excess cash — means it would suck cash from the system to stymie demand and cool prices.
The issues discussed in the meeting include, functioning of FSDC, state of the Indian economy, economic recovery in advanced countries and implications for India.
Besides, Subbarao and officials of the finance ministry, the meeting was attended by Securities and Exchange Board of India (SEBI) chairman C B Bhave, Insurance Regulatory and Development Authority (IRDA) chief J Hari Narayan and Pension Fund Regulatory and Development Authority chairman Yogesh Agarwal.