Regulators want steps to curb inflation

The financial sector regulators on Saturday urged Finance Minister Pranab Mukherjee to unveil investment friendly and counter-inflationary measures in the Union Budget next month.

Suggestions to this effect came at a meeting of Financial Stability and Development Council (FSDC), chaired by Mukherjee. The meeting, attended by RBI Governor D Subbarao, Sebi Chairman U K Sinha and Pension Fund Regulatory and Development Authority (PFRDA) Chair-man Yogesh Agarwal, assumes importance since the central bank had asked the finance ministry to resume fiscal consolidation and there are speculations whether the budget will cut securities transaction tax (STT) rate or not.

“The regulators suggested pro-investment, progrowth and anti-inflationary measures for the budget," Agarwal told reporters after the meeting.

The economic growth rate in the current financial year is estimated to decelerate to 6.9 per cent, from 8.4 per cent a year ago. This is close to 6.8 per cent growth witnessed during the global financial crisis in 2008-09.

Subbarao said, "This is a pre-budget FSDC meeting. The Finance Minister heard all the regulators. Of course, the RBI has responsibility, both for macro-economic management and for banking regulation. The outcome of on Saturday's meeting will be reflected in the budget."

In its monetary review last month, RBI had said the Centre's fiscal deficit could potentially crowd out credit to the private sector. Moreover, slippage in the fiscal deficit has been adding to inflationary pressures and it continues to be a risk for inflation, it had said.

“There is an urgent need for decisive fiscal consolidation, which will shift the balance of aggregate demand from public to private, and from consumption to capital formation," Subb-arao had said.

There are speculations whether the budget would go for STT rate cut or not, with no categorical statement coming from the Finance Ministry, though, initially it had favoured such a cut.

Mukherjee will present the Union Budget proposals for 2012-13 in the Lok Sabha on March 16.