Bangalore: Economy to recover from stress soon: Chidambaram

Bangalore, Oct 5 (IANS): India's sagging economy would recover from stress in the second half of this fiscal to return to high growth over the next two years, Finance Minister P. Chidambaram said Saturday.

"The country's economy will recover from stress this fiscal (2013-14) as it has enough the capacity to get over it to post higher growth than last fiscal (2012-13)," Chidambaram said on the margins of a function to mark the centenary celebrations of State Bank of Mysore (SBM) here. The 101st branch of the Bank was inaugurated on the occasion.

In view of a normal monsoon resulting in higher growth in the farm sector and steps to boost demand in services and manufacturing sectors, Chidambaram hoped the national gross domestic product (GDP) growth this fiscal would be better than last fiscal (2012-13) when it was 5 percent as against 6.5 percent in 2011-12.

"The recovery will enable the economy to grow 6-7 per cent next fiscal (2014-15) and return to 8 percent growth in fiscal 2015-16," the finance minister said.

The economy has been projected to grow at 4.5-5 percent GDP this fiscal (2012-13) as against 5 percent last fiscal (2012-13) due to slow down in the first two quarters.

"Last year, pundits, analysts, rating agencies and all the wise people, who appear on television channels daily, told me that we cannot contain fiscal deficit. I am happy that we were able to surprise them. We did contain fiscal deficit at a level below (4.9 percent) what I had indicated (5.2 percent)," Chidambaram said after unveiling 101 branches of the State Bank of Mysore (SBM) simultaneously through remote switch.

Referring to the current account deficit (CAD), the finance minister said he would ensure it is restricted to $70 billion this fiscal as against $88 billion last fiscal.

"We were told that we will not be able to contain CAD. But I will surprise them (pundits) once again by containing it well below $70 billion. Though I do not have a magic wand, I say this because we have intellectual capacity and the people who give us confidence that we can overcome the stress period," Chidambaram said.

Extolling the people for being very good in savings, the finance minister said even in the worst of times the savings rate did not go below 30 percent.

"I have no doubt everyone saves, which is a great fortune of our country. If those savings are channelised into productive investments and if we create a climate where people can take risks, I am sure we will get over this period of stress," he said.

Noting that the country was blessed with very good economists, economic advisors and administrators, Chidambaram said a fresh set of policies could be drafted through dialogue with stakeholders and time could be given to them for implementation.

"Believe me, sooner than later we will find results," he added.

New banks should not be clones, but different: Chidambaram

The proposed new private banks, awaiting license from the Reserve Bank of India (RBI) to commence business, should not become clones of existing banks but serve their customers differently, Union Finance Minister P. Chidambaram said.

"We don't want the new banks to look like each other with different mastheads. We want each of them to cater to needs of special group of customers who do not have an account in a bank. Each bank must strike out different path to compete against each other," Chidambaram said.

The central bank (RBI) Sept 20 set up an advisory committee headed by its former governor Bimal Jalan to scrutinise applications of 26 firms, which applied for licenses to set up private banks.

The RBI plans to grant license to set up seven new banks after receiving the committee's report in January 2014.

The central bank board Friday named its former deputy governor Usha Thorat, former Securities and Exchange Board of India chairman Chandu Bhave and former ICICI Foundation chairman Nachiket Mor as members of the committee.

"It is only if the new banks attempt different things and do things differently, they will have competition, efficiency and progress," Chidamabaram said after remotely unveiling 101 new branches of State Bank of Mysore (SBM) here across states.

On infusing additional capital into state-run banks, the finance minister said the government was waiting for banks to come up with their specific plans to assess if they need more capitalisation.

"We will work out how much (capital) each bank requires depending upon how much additional credit they will be able to provide to specific sectors at lower rates," he observed.

State-run banks will be encouraged to lend more in certain sectors at lower rate to boost demand.

"Let each bank come up with what it can do. Once we know what they (banks) can do, we can aggregate the demand and calculate how much additional capital they require and they will be provided," Chidambaram said.

Presenting the Union budget for this fiscal (2013-14), the finance minister proposed to infuse an additional capital of Rs.14,000 crore in the state-run banks for strengthening their equity base.