The government today voiced concern over artificial devaluation of currencies and said it could hurt the competitiveness of Indian companies.
In the first meeting of the new Financial Stability and Development Council (FSDC), it said protectionist measures could have serious implications for the world economy.
The issues were discussed in the backdrop of global developments in this regard. The US has been insisting that China allow its currency to rise in value and China is resisting, to protect its exports.
Chaired by Finance Minister Pranab Mukherjee, the meeting discussed how the FSDC should work, the state of the economy, recovery in the West and implications for India.
It was decided that guidelines would be issued for the functioning of FSDC, established to address inter-regulatory coordination issues and to strengthen the mechanism for maintaining financial stability. The meeting also decided that the secretary of the council would be in the Reserve Bank of India headquarters in Mumbai.
“We had a very positive and constructive meeting,” Mukherjee told reporters after the meeting. On the state of the economy, the consensus was that the nation would be able to sustain its present level of growth and prospects were bright for attaining double-digit figures. The challenges would include reducing the fiscal and current account deficits and fast-tracking infrastructure projects.
“The meeting came to the conclusion that 2011 could see improvement in the world economy. The US could see better growth in 2011. The EU could also see positive growth, though the sovereign debt crisis and woes of some nations are a matter of concern. In the light of the projected economic recovery, India’s exports are likely to improve,” went a statement issued after the meeting.
The finance minister had proposed to set up the FSDC in his Budget speech in February 2010. Earlier, the government had proposed two sub-committees, with the one on regulatory coordination chaired by the Reserve Bank of India governor and the other, on financial stability, headed by the finance secretary. However, after RBI raised its concerns, the government changed the structure and said there would be only one sub-committee, headed by the governor of the central bank. It would replace the High Level Coordination Committee on Financial Markets.
Those who attended were D Subbarao, governor, RBI; Ashok Chawla, finance secretary; R Gopalan, secretary, financial services; Rajiv Aggarwal, secretary, consumer affairs; Kaushik Basu, chief economic advisor; C B Bhave, chairman, Securities and Exchange Board of India; J Hari Narayan, shairman, Insurance Regulatory and Development Authority; Yogesh Agarwal, chairman, Pension Fund Regulatory Development Authority; B C Khatua, chairman, Forward Markets Commission; Bimal Julka, director general, directorate of currency, and Thomas Mathew, joint secretary, capital markets.
