Government needs to prioritise managing macroeconomic fundamentals amid West Asia conflict: CEA
At a time when West Asia conflict triggered a massive global energy shock, Chief economic advisor (CEA) V Anantha Nageswaran has suggested that the government needs to prioritise managing macroeconomic fundamentals like the balance of payments and current account deficit. He refrained from giving any policy prescriptions on the securitisation front and stressed that the financial market has to keep up with the activity in the real sector and reminded that it was the extra focus on derivative products which led to the Global Financial Crisis in 2008.
Regarding the Rs 3 lakh annual income limit leading to qualification as microfinance, Nageswaran said he is against this system of putting numerical thresholds and would rather like the policy to come out with ratios on the same. He added that income thresholds when the economy was $1 trillion in size cannot be the same when the economy has grown to over $4 trillion, and the average incomes have also grown.
On the Priority Sector Lending (PSL) mandate, he pointed that this is resulting in higher volumes. PSL is a Reserve Bank of India (RBI) mandate that requires banks to allocate a specific percentage of their Adjusted Net Bank Credit (ANBC) to underserved economic sectors. The primary goal behind the PSL mandate is to ensure that credit flows to crucial segments like agriculture and small businesses.
