FSDC to meet on July 27 to discuss growth prospects

The spectre of high inflation and a possible slowdown in the economy continue to weigh heavy on the government’s mind. The recently set up Financial Stability and Development Council is expected to discuss the issue in its next meeting.

The FSDC, which consists of the four financial sector regulators and is chaired by finance minister Pranab Mukherjee, is scheduled to meet on July 27, a day after the central bank RBI presents the first quarterly review of the monetary policy.

The council is expected to discuss the macroeconomic scenario and prospects for growth. “It is a just review meeting to understand how the economy is faring and growth prospects for the year ahead,” a person close to the development said.

The FSDC was set up by the government in the wake of the global financial crisis in 2008-09 and is aimed at better coordination between financial sector regulators to ensure macro-economic stability.

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 have curtailed India Inc’s expansion plans and led to fears of a possible slowdown. A burgeoning fiscal deficit is also being seen as a potential threat to the economy.

Industrial production grew 6.3 per cent in April and is expected to have slowed down further in May.

Meanwhile, headline inflation rose to 9.06 per cent in May and is likely to have soared to double digits in June, following the government’s decision to hike prices of LPG, diesel and kerosene.

While the finance ministry has till now not pared down its growth forecast of close to 9 per cent in 2011-12, most economists expect GDP growth to be lower.

A worried government has held a number of meetings with investors and financial institutions. Finance minister Pranab Mukherjee discussed the economic prospects with institutional investors early last month asking them to stay optimistic about growth prospects.

The Prime Minister’s Economic Advisory Council also held a similar meeting to understand investors’ opinion about economic scenario.

Source: www.indianexpress.com