Mundra hails fiscal roadmap, non-committal on rate cuts

Tuesday, Mar 1, 2016,16:16 IST By Metrovaartha A A A

Mumbai | Welcoming the government’s adherence to the fiscal deficit goals in a pragmatic and balanced Budget, Reserve Bank deputy governor SS Mundra today said banks’ consolidation should happen after balance-sheets of public sector banks are cleaned up. It is a pragmatic Budget, particularly if you look at the fiscal consolidation roadmap that the FM has very much adhered to.

The thrust on rural economy and job creation are very positive for long-term benefits, the thrust on social and public investment should also be very important. Overall, it is a balanced Budget with a very long-term impact, Mundra told reporters today. When asked if rate cuts are expected as the government borrowing will be contained as announced earlier, Mundra said, wait for the announcement, whenever it happens.

The next monetary policy is in April. Reserve Bank Governor Raghuram Rajan had slashed repo rate by 0.25 per cent a day after the Budget last year. In the run-up to this Budget, the Reserve Bank had explicitly said it was looking for action on the fiscal deficit front, and the government’s commitment to keep the fiscal deficit number at 3.5 per cent of GDP for the next fiscal has heightened expectations of a rate cut. Following the Budget, the benchmark government bond yields fell, signalling that the street is expecting a low interest rate regime, which will help corporates and retail borrowers alike.

The bond yields have been on an upswing in recent weeks as talks of a lose fiscal policy gained momentum. Meanwhile, on the budgetary announcement of working on the state-run banks’ consolidation, Mundra suggested completion of the ongoing work on cleaning up the banks’ balance-sheets of bad assets before such a move is undertaken.