The Telegraph
Tuesday , April 1 , 2014
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Contrasting view on PC screen

New Delhi, March 31: Finance minister P. Chidambaram doesn’t believe that the Reserve Bank of India (RBI) or the petroleum ministry should have lobbed the contentious issues of handing out new bank licences and raising domestic gas prices to the Election Commission.

While the Election Commission is yet to communicate its views on new bank licences to the RBI, it has advised petroleum secretary Saurabh Chandra not to implement the new gas pricing formula from April 1.

Chidambaram today went on to criticise his nominee for the RBI governor’s job — Raghuram Rajan — terming his seeking of a clearance from the Election Commission for the new bank licences as sending a “wrong signal” and a case of “playing it safe”.

“Governor Raghuram Rajan assumed office only in September last year. He had chosen to act with abundant caution when lobbying the question to the poll panel. He needn’t have done so,” Chidambaram said.

The finance minister said the decision to lob the bank licencing question to the poll panel had created a misapprehension in the minds of people that the government had some role to play in doling out the new bank licences which wasn’t the case.

“The RBI had drafted the guidelines for the issue of new bank licences. It called for applications, vetted them and asked an independent, external panel to draw up a shortlist. The government had no role to play in all of this. I believe that the RBI should have continued with the process of issuing bank licences without referring the issue to the poll panel,” he added.

Chidambaram said he would not stop from taking policy decisions, merely because an election was ahead.

He made it clear that his government will consider easing curbs on gold imports after the RBI announces its bi-monthly monetary policy tomorrow.

The government had raised the import duty on gold to 10 per cent from just 2 per cent to tame mounting imports, which were threatening to deplete foreign exchange reserves.

Following this, gold imports came down to 19 tonnes in November from a peak of 162 tonnes in May.

The current account deficit, too, was brought down to 3.1 per cent of the gross domestic product (GDP) in April-September of the current fiscal, from 4.5 per cent of GDP in the same period last year.

UPA leader Sonia Gandhi had written to the government in January to look at a demand by an association of some 40,000-odd jewellers for concessions in the gold import policy, The problem for Chidambaram could be that any decisions taken by the government could well be seen as a sop by the EC.

“Some relaxations were made a few days ago when more banks were allowed to import gold. We could consider more relaxations in consultation with the RBI,” he said.

“Let the RBI’s monetary policy be announced tomorrow and then we will consider whether some relaxation can be done,” he said.

Emphasising that the economy today is far more stable than what it was 20 months ago, he said, the current account deficit is expected to come down to about $35 billion this fiscal.

It was at a record high of $88.2 billion, or 4.8 per cent of GDP, as gold imports soared 845 tonnes last fiscal.