Budget will bear pressure of stimulus: RBI governor

Delivering the keynote address at The Financial Management Summit ’09 hosted by The Economic Times, Reserve Bank of India Governor Dr Duvvuri Subbarao said the crisis emerging from the global recession was the worst ever in his time. Under such a scenario, stimulus packages announced by the global governments assume huge importance, he said. However, irrespective of this, the debate over the adequacy and effectiveness of fiscal measures by different governments continues, he said. Every government and regulator is trying to protect his nation from the impact of recession. In the last eight months, macro economy has been challenged and global GDP is expected to contract for the fist time since the World War II, he said. However, impact in India is less than the other countries, the RBI governor said. Subbarao made a note of the role of G 20 countries in the recovery and said that at the last meeting the group had discussed how to revive growth and regain confidence at the global level. He noted three crucial aspects before the RBI-- monetary policy, fiscal policy, and financial stability. Expecting a probable recovery in the latter part of the current year, he said that if global recovery doesn’t take place, we will conclude the policy measures should have been stronger and that the RBI would act accordingly. On the fiscal policy measures, he underscored the need for fiscal consolidation process. But he also cautioned that the next budget of the new government will bear pressure of stimulus packages. He thinks a sound banking system along with a well developed financial market will help bring financial stability.