AIR Spotlight: Financial Stability and Development Council (FSDC) Meeting

AIR Spotlight is an insightful program featured daily on the All India Radio News on air. In this program, many eminent panellists discuss issues of importance which can be quite helpful in IAS exam preparation.

This article is about the discussion on: ‘Financial Stability and Development Council (FSDC) Meeting’.

Participants:

• A.K. Bhattacharya: Economic Analyst
• Lalima Aneja Dang: AIR Correspondent

Context – The Finance Minister, Smt. Nirmala Sitharaman reviewed the state of the economy amid global and domestic challenges at a meeting of the Financial Stability and Development Council (FSDC). The 27th meeting of the high-level panel was attended by all financial sector regulators. The FSDC is the apex body of sectoral regulators, headed by the Union Finance Minister.

Financial Stability and Development Council (FSDC)

Financial Stability and Development Council (FSDC) is an apex body which was proposed by the Raghuram Rajan Committee in 2008. It was set up in 2010 as an autonomous body dealing with financial regularities in the financial sector across the country. It is not a statutory body.

• The council acts as a coordination agency between the various financial sector regulators – the RBI, SEBI, IRDA and the PFRDA. 
• This council monitors macro-prudential supervision of the economy, including the functioning and development of large financial multinational companies, and deals with inter-regulatory coordination issues.

Know more about the Financial Stability and Development Council in the linked article.

Significance and main agenda of the FSDC Meeting

The Financial Stability and Development Council (FSDC) is the apex body of sectoral regulators headed by the Union Finance Minister. It is a forum where the government’s top policymakers meet to analyse India’s financial sector. 

• The 27th FSDC meeting was chaired by the Finance Minister in the presence of Ministers of State (MoS) for Finance. Reserve Bank of India (RBI) Governor Shantikanta Das, Insurance Regulatory and Development Authority of India (IRDAI) Chief, Securities and Exchange Board of India (SEBI) Chairperson, Pension Fund Regulatory and Development Authority (PFRDA) Chief, Finance Secretary, Revenue Secretary, Department of Financial Services (DFS) Secretary, Department of Economic Affairs (DEA) Secretary and other officials of the finance ministry participated in the FSDC meeting.
• The main purpose of such a meeting is to assess the threats, challenges and opportunities for India’s financial sector in the current global scenario. The meeting aimed at taking stock of the financial situation in the country and to make sure that India’s financial sector which so far is vibrant and stable does not get affected by the continuing liquidity crisis in the banks of the West.
• The meeting reviewed the current global and domestic economic situation and financial stability issues, including those concerning banking and NBFCs in view of the failure of Silicon Valley Bank and Signature Bank and the liquidity pressure faced by Credit Suisse.

Impact of Global Banking Crisis on Indian Banks

The banking crisis in Europe and America has jolted the financial world. America’s Silicon Valley Bank and Signature Bank collapsed and the Credit Suisse Bank of Europe was struggling when the Swiss government brokered a deal allowing UBS to take over the bank. Since it is an interconnected world, it is difficult to insulate any sector of the economy from global headwinds. However, experts opine that the Indian banking system will remain insulated against the troubles happening in the US and Europe.

• In terms of capital adequacy and liquidity ratios, Indian lenders have performed well in the past and it worked as a buffer to safeguard from the present crisis.
• Indian macroeconomic indicators are improving day by day and they can stand out in this global financial turmoil.
• Indian banks are capable of safeguarding themselves on the back of strong banking regulations that have been put in place. 

Despite the Global Headwinds – India is the fastest-growing economy in the world

The main two factors that have changed the global scenario as far as the economy is concerned are the Pandemic and Russia – Ukraine Conflict. These have led to global economic slowdown and the devastating effects are beginning to weigh in on leading economies around the world. Energy prices have skyrocketed and inflation rates have seemingly spiralled beyond the control of governments. For developing and poor nations, the risk of a food security crisis is also on the horizon. Despite all the global headwinds, India’s economy is showing resilience and stability. India stands tall and steadfast, emerging as a beacon of resilience in the global economy

• The most important factor for India’s economic resilience is its young population (demographic dividend). India is one of the few young nations with more than 50% of its population below 25 years of age. The large youth force offers both a workforce as well as a market.
• The Indian economy remains insulated from global headwinds as it continues to power on the back of domestic demand and the services industry. The central government’s push on making India a global manufacturing hub has been paying off, with the ‘Make in India’ program slated to facilitate the creation of 100 million new jobs and establish India as a formidable alternative to countries like China.
• The Central government, particularly in the post-covid era, has gone in for a combination of policies which includes the introduction of welfare schemes, spending a lot of money on infrastructure development, etc. The Union Budget 2023 is being lauded for its balance between addressing development needs and maintaining fiscal responsibility with enhanced capital expenditure that provides a strong foundation for long-term growth and ensures sustainable development for India.
• India’s efforts in leveraging digitisation to overcome the challenges posed by the pandemic have not only helped the country weather the storm but have also created new opportunities for growth and development. 
• The country recorded a 23% growth in foreign direct investment (FDI) inflows post-Covid when compared with the equivalent pre-Covid period and continues to attract FDI equity inflow in sunshine sectors such as manufacturing, information technology (IT) and other services industries.

Conclusion – India’s holding of the G20 presidency has conclusively gestured its rise as an important leader on the worldwide stage. Even though the economies of many countries (both developing and developed countries) showed a slowdown due to the unprecedented global challenges thrown up by the pandemic and the Russia-Ukraine war, India’s economy is resilient and stable amidst these global challenges. However, the benefits of economic growth should percolate down to all sections of society and not be restricted to the upper leg of society in order to show the world that India’s economy is sustainable as well as equitable.

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