Financial Stability and Development Council reviewed Current Economic Situation in India

The Financial Stability and Development Council (FSDC) headed by finance minister Pranab Mukherjee on 27 July 2011 reviewed the general economic situation in the light of steep rate hike by RBI.  The meeting was attended by all financial sector regulators including Sebi chairman, RBI governor, PFRDA chairman, and finance secretary and chief economic advisor. The financial regulators were of the opinion that high inflation will not be conducive to short-term growth
The relationship between inflation and growth was treated as a cause of concern. Although the group felt that in long term, India’s growth prospects are bright but in the short term it seemed crucial to tackle inflation.

The meeting discussed a need of common know your customers (KYC) norms in order to streamline different processes. The sub-committee of the council had earlier proposed replacing the separate KYC checks run by banks and financial institutions with a single, more stringent one.
The Financial Stability and Development Council (FSDC), chaired by finance minister Pranab Mukherjee, took stock of the financial stability situation. The council discussed the impact of the rate hike announced by the Reserve Bank of India (RBI) on 26 July 2011 on the economic growth.

While the economy is expected to grow between 8 and 8.5 per cent in 2011-12, the persistently high inflation and subsequent interest rate hikes by the RBI curtailed India Inc’s expansion plans and led to fears of a possible slowdown. Rising fiscal deficit along with current 8% repo rate announced by the RBI was also deemed as a potential threat to the economy.