The fiscal consolidation is a critical area in India’s economy and controlling it requires abolition of subsidies, which remains a key factor, Dr Subir Gokarn, Deputy Governor, RBI has said.
In his keynote address on “Assessment of the Current Economic Situation” at the 154th annual general meeting of the Cochin Chamber of Commerce and Industry, he said that the macro economic foundations for rapid growth are low and stable inflation, low fiscal deficit, low current account deficit and high investment.
Any variations in these factors could adversely affect the economic growth. He said that the global conditions are volatile and uncertain and are likely to remain so. Domestically while growth is slowing, core inflation is also moderating. Even though the oil prices are providing some relief, the food inflation is likely to persist.
According to Mr Gokarn, liquidity is returning to normal. However quality of asset is a matter of concern, but it is not a threat.
Dealers will wait to see whether the RBI announces an OMO next week after the last one on May 5.
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