Global economic situation daunting; India well protected: DEA Secy

Economic affairs secretary Ajay Seth has said the global financial situation is daunting and there is a need to exercise caution. He also mentioned that the Financial Stability and Development Council (FSDC) meeting, chaired by the finance minister on Monday, took note of the ‘daunting challenges’ coming from the global economy.

Addressing the media after the FSDC meeting, Seth said, “Global financial situation is daunting but at the same time India’s economy especially the Indian financial sector is well protected. Regulated systems are in place, but we need to be cautious and need to be on our toes.”

It may be noted that the FSDC meeting took place in the backdrop of the debt ceiling standoff in the US, with Janet Yellen warning of a Constitutional crisis if Congress does not act on the debt ceiling. This comes close on the heels of bank collapse in the US and Europe.

Seth also added the council discussed putting in place early warning indicators to identify stress in the economy at an early stage. “As far as the early warning indicators are there, they are the set of indicators or the assessment of the economy so that the financial sector stress is noticed well ahead in time so that the corrective measures could be taken,” adding that it is a work in progress.

The debt limit is a law that caps the borrowing limit of the government. The current limit of $25 trillion has been breached in January. Congress votes on raising the limit or suspending it for additional borrowings, which is more of a routine. This time, however, the congress is not agreeing on the terms. The ramifications of the debt ceiling not getting relaxed would default on federal expenditures, including salaries and pensions.