Skip to main content

India likely to stick to deficit target, may step up bank reform: Modi adviser

NEW DELHI: India is likely to stick to its fiscal deficit target of 3.2 percent of GDP, and may accelerate sales of government stakes in lenders and other companies as part of an effort to recapitalize banks, an adviser to the prime minister said on Tuesday.
Prime Minister Narendra Modi’s government has already used up nearly all of its budget for the current fiscal year and tax revenues are expected to fall far short of initial expectations. At the same time economic growth has slowed, sparking calls for more stimulus.
                                                                             But Surjit Bhalla, a member of Modi’s Economic Advisory Council, told Reuters in an interview, that the government had stuck to its fiscal deficit targets over the past three years and is expected to do so this year as well.
The central bank has warned that missing the fiscal deficit target could lead to a spike in inflation, hurting macro-economic stability. Indian stocks slid last month on reports that a stimulus package worth up to 500 billion Indian rupees ($7.7 billion) might be in works – one that would widen the deficit to 3.7 percent of GDP.
Economic growth slipped to its lowest level in three years in the first quarter, logging an annual rate of 5.7 percent, but Bhalla said there were signs of recovery.
“I am more optimistic on the economy than I was two weeks ago,” he said, adding that last week’s industrial output and export data suggested fears about a slowdown were exaggerated.
Speaking at his home office in New Delhi, he said that GDP growth could be close to 6.5 percent for the fiscal year – although that forecast is lower than the central bank’s latest estimate of 6.7 percent.
Modi formed the Economic Advisory Council last month to address issues of macroeconomic importance and present its views to the prime minister. Bhalla said the council’s views on the fiscal deficit has been communicated to the government by its chairman, Bibek Debroy.
BANKING WOES
Sour loans in India’s banking sector hit a record 9.5 trillion rupees ($146 billion) at the end of June with stressed loans as a percentage of total loans at 12.6 percent – the highest level in at least 15 years.
That represents a major problem for Asia’s third largest economy, as provisions eat into profits and new lending is choked off. The bulk of the sector’s bad loans are held by the country’s 21 state-run banks.
Asked how much it would take to recapitalize state-run banks, Bhalla said: “My reading is that it would probably require about 1 trillion rupees ($15.4 billion).”
In contrast, Moody’s expects the top 11 state lenders alone will need nearly $15 billion, while Fitch Ratings estimates Indian banks will need $65 billion of additional capital by March 2019 to meet Basel III global banking rules.
Bhalla added the government could speed up the sale of its stakes in state-run banks and other companies to fund the recapitalization.
The government has allocated $3 billion in its budget for bank recapitalization, but senior finance ministry officials say a decision on an infusion of more funds could be taken by end-December.
Labels:

Comments

Post a Comment

Popular posts from this blog

Acharya appointed to NOC’s top post

The government has given the responsibility of the executive director of Nepal Oil Corporation (NOC) to Joint Secretary at Ministry of Supplies (MoS), Prem Prasad Acharya.A ministerial-level meeting at MoS today decided to give the responsibility of NOC’s top post to Acharya until further notice, according to Urmila KC, undersecretary at MoS. The post of executive director at NOC had become vacant after the government, on Monday, sacked the then executive director of the corporation Gopal Bahadur Khadka for his alleged involvement in financial irregularities while procuring land for the development of petroleum infrastructure.
Post a Comment
Read more

‘Clean India’ mission not ending manual scavenging, activists say

MUMBAI:  A flagship government program to modernise India’s sanitation has failed to tackle the practice of low caste women clearing faeces by hand, and has even exacerbated the problem by building toilets not connected to water supplies, campaigners say. Prime Minister Narendra Modi launched the Swachh Bharat Abhiyan, or Clean India Mission, with much fanfare after he took office in 2014, sweeping a Delhi street with a broom. Since then, thousands of toilets have been built across the country.But Dalit communities, especially women, are still forced to be manual scavengers, a euphemism for clearing faeces from dry toilets and open drains by hand, despite laws to end the practice. The workers have it harder now, activists said. “Swachh Bharat has diverted attention from ending manual scavenging, and makes it seem like the whole country is cleaning. But if that’s the case, then why are people still dying in septic tanks,” said activist Bezwada Wilson. “There is also no dis...
Post a Comment
Read more

US trio win Nobel for finding Einstein’s gravitational waves

STOCKHOLM/LONDON:  Three US scientists won the 2017 Nobel prize for physics on Tuesday for opening up a new era of astronomy by detecting gravitational waves, ripples in space and time foreseen by Albert Einstein a century ago. The work of Rainer Weiss, Barry Barish and Kip Thorne crowned half a century of experimental efforts by scientists and engineers.Measuring gravitational waves offers a new way to observe the cosmos, helping scientists explore the nature of mysterious objects including black holes and neutron stars. It may also provide insight into the universe’s very earliest moments. The first detection of the waves created a scientific sensation when it was announced early last year and the teams involved in the discovery had been widely seen as favourites for Tuesday’s prize. “We now witness the dawn of a new field: gravitational wave astronomy,” Nils Martensson, acting chairman of the Nobel Committee for Physics, told reporters. “This will teach us about the ...
Post a Comment
Read more