Finance minister P. Chidambaram called on Saturday for the country’s central bank to take “calibrated risks” to support the struggling economy as a reciprocal measure to government fiscal efforts.
In an interview with Reuters, Mr Chidambaram said the government was committed to “fiscal correction”, a nod to rating agencies that have threatened to make India the only BRIC nation with a junk credit status, even accounting for recent economic reforms.
After growing close to 10 per cent before the global financial crisis, years of policy inertia has slowed the rate of expansion to close to 5 per cent and a deep budget deficit has put the country’s credit rating in peril. After loosening rules on foreign investment in retailing and airlines in a set of “big bang” reforms, Mr Chidambaram said it was now the Reserve Bank of India’s turn to take action. “It’s a call that the RBI has to take,” Mr Chidambaram said.