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Stressing that economic stability should include steady prices, Finance Minister P. Chidambaram today said Parliament could set an inflation target for the Reserve Bank of India (RBI) to achieve.
Painting a rosy picture of the economy, the minister said the fiscal deficit target of 4.6 per cent of GDP for 2013-14 will be achieved and the current account deficit (CAD) will remain below USD 40 billion, against an earlier estimate of USD 45 billion.
Talking to reporters after his customary address to the RBI Board following the Budget presentation, P. Chidambaram, who took over as Finance Minister in August 2012, emphasised the economy is presently more stable than it was 18 months ago.
RBI Governor Raghuram Rajan, who was also present, said the central bank would issue new bank licences in "a few weeks" after obtaining the Election Commission's approval.
Elaborating on prices, P. Chidambaram said he was happy that Rajan in one of the statements "acknowledged that the government through Parliament will set an inflation target and leave the regulator to find ways and means to achieve that target. I think that is the correct approach."
The sovereign has a right to set the target and then the RBI has a mandate to take steps to achieve it, he said.
"I think there is great degree of convergence on the way to go forward...We must achieve both goals of price stability and growth...I am sure working together the government and central bank will be able to achieve these goals," he said.
The RBI-appointed Urjit Patel panel has recommended that the central bank should set a retail inflation target of 8 per cent by January 2015 and 6 per cent by January 2016.
Inflation as measured by the consumer price index was 8.79 per cent in January.
Referring to the economy, P. Chidambaram said it "certainly is more stable today than what it was 18 months ago. That is reflected in the strengthening of the rupee, that is reflected in heightened interest of investors, both FDI and FII."
He said measures taken by the RBI and the government are complementary and have delivered substantially on the goal of stability set 18 months ago.
On easing of curbs on gold imports, P. Chidambaram said the government would revisit the matter after the final CAD numbers are out.
The CAD narrowed to USD 26.9 billion (3.1 per cent of GDP) in the