•SHEKHAR GUPTA: Welcome Mr Deepak Parekh, it’s a pleasure to have you here. I’m glad that you are here at a time when there is a lot of discussion and debate on what’s happening in banking, Indian financial sector. What’s on the agenda for Indian financial reforms? International financial sector has created a lot of controversy. What should India be doing?

No, I think you are right, we are at a very interesting time, where enthusiasm was at an all-time high, markets were at an all-time high. Suddenly we see a blip, because of a number of factors. We suddenly realise that our GDP growth numbers may have to be reworked. We have to balance growth and inflation. The inflation was around three per cent and today it is 6.68 per cent. Actually, in four months, inflation has more than doubled, which is a cause of great worry. The government also thinks that controlling inflation is more important than growth. Growth can be sacrificed but inflation cannot go on the way it has gone. So curtailing inflation is one of the major concerns today for the government.

Certain steps have been taken on the fiscal and supply side by the government, including cutting import duties, banning export of non-basmati rice. Let’s hope that increase in supply will bring inflation to a reasonable level. Monetary measures are also there, which the Reserve Bank is in charge of and in an inflationary situation the common thing that happens is increase in interest rates. It’s a little ironic that one hand you have prices oil, gold, coffee, iron ore and commodity prices at an all-time high. On the other hand you see the US economy, which is the largest economy, and the European economy, which are talking about one per cent GDP growth. The financial sector has never been as badly impacted as it is today. We don’t see any bright sparks in the economy of the developing countries, whether you look at Japan or at the East or the West. So this is the cause of concern: that on one hand growth is slow and on the other hand the commodities and prices of everything are going up.

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