India’s macro-economic stability remains strong on the back of an improvement in fundamentals, structural reforms with the launch of the goods and services tax and steps to tackle the twin balance sheet problems, according to the deliberations at a meeting of the Financial Stability and Development Council (FSDC) on Tuesday, chaired by finance minister Arun Jaitley. The Council, consisting mostly of regulators and secretaries of the finance ministry, also took note of investor confidence in financial markets, which is reflected in high and rising bond and stock valuations and long-term positive consequences of demonetisation, according to a finance ministry statement.
Chief economic advisor Arvind Subramanian made a presentation on the state of Indian economy at the meeting. The twin balance sheet problem refers to overleveraged companies and bad-loan-encumbered banks, which has dented investments in the economy.
“The Council also discussed the issues and challenges facing the Indian economy and the members agreed to the need to keep constant vigil and be in a state of preparedness of managing any external and internal vulnerabilities,” the ministry said in the statement.
RBI governor Urjit Patel, finance secretary Ashok Lavasa, economic affairs secretary Subhash Chandra Garg, financial services secretary Anjuly Chib Duggal, corporate affairs secretary Tapan Ray, MeiTY secretary Ajay Prakash Sawhney, Sebi chairman Ajay Tyagi and IRDAI chairman TS Vijayan were among those who attended the meeting.
The Council also took stock of the progress of the Financial Sector Assessment Programme for India, jointly conducted by the International Monetary Fund and the World Bank. “The Council directed that the assessment report should be finalised by the end of this calendar year,” it said.
A brief report on measures taken by the FSDC sub-committee, headed by the RBI governor, was presented at the meeting. The Council also went for a comprehensive review of the action taken on the decisions at earlier meetings of the body.
The meeting deliberated on the central KYC registry system and discussed the issues and suggestions relating to the operationalisation of the registry. Sebi has already set the December deadline for linking Aadhaar with KYC for stock market transactions. The Council also discussed at length on strengthening regulation of credit rating agencies.