Finance minister Pranab Mukherjee on Friday said the government’s prediction of around nine per cent GDP growth was not possible due to the global economic situation. This forecast now stands at seven to eight per cent.
Speaking at the Institute Chartered Accountants of India, he said steps to put the world economy on track after the 2008 crisis did not fructify and the recovery was fragile.
He said the fiscal deficit had also shot up to 6.8 per cent in 2008-09 but was brought down to 4.7 per cent in 2010-11. Unfortunately, it may be more than what was predicted during the Budget for 2011-12.
He said India had registered robust economic growth till 2007-08. The government was hoping to have around nine per cent in 2011-12 but could not achieve it due to the euro zone crisis.
The volatility of international commodity prices affected short-term and medium-term predictions, he said.
India is hugely dependent on import of crude oil. It was predicted the average crude price would be $90 per barrel.
But, through the year, Brent crude was at about $107 per barrel. The entire cost could not be passed on to consumers, which affected the budget.
All these issues, he said, were the direct impact of a deteriorating international economy. However, he said, India had overcome all this and returned to the path of higher growth.
The finance minister also said that there is a concern about deteriorating quality of assets.
In his special address at the Indian Overseas Bank’s Special Platinum Jubilee Celebration in Chennai on Friday, the Finance Minister said that the NPAs have grown faster than credit growth. “There is a need for banks to tighten their belt going towards a more rigorous regime of capital requirements in Basel-III.”
Speaking after inaugurating Indian Bank’s new corporate office later, the minister said that draft guidelines on Basel III was released on December 30. This will be implemented in phases from January 1, 2013, to 2019.
“The new norms will have more stringent measures besides envising capital requirements for the Banks.”
Against the RBI’s norms of six per cent for tier-I capital, public sector banks have capital adequacy ratio of eight per cent. “The government is committed to adequately capitalising all the PSBs. Extra provision also be taken care for 2012-13. These measures will help PSBs compete with international banks.”
Financial exclusion of poor is constraining future growth. It is the key to overcome the private lenders and to trigger the economic growth.
