Efficient public distribution system key to fighting inflation: RBI governor
25 May 2011
An eficient public distribution system is the key to easing supply side constraints and bringing down prices of essential commodities, and states have an important role to play in this, Reserve Bank governor D Subbarao said today.
States could, for instance, help better manage public distribution system, improve productivity in agriculture and allied activities, reform the functioning of Agriculture Produce Marketing Committees (APMCs) and improve the infrastructure, such as, storage facilities, Subbarao told a conference of state finance secretaries in Mumbai today.
There is also a need to improve the efficiency level of states in managing funds, in terms of better planning, cash management and adherence to fiscal discipline, the governor said.
Besides improving revenue collections through tax reforms, the states should also focus on expenditure management, he said.
On the agenda of financial inclusion and financial literacy, the governor said there was a need to improve the effectiveness of state level bankers committee (SLBC). The attempt should be to move from a target driven approach to more meaningful financial inclusion, he said. The states, in collaboration with the RBI, banks and the central government can play an active role in this, he said.
State governments, he said, should caution the public against entities that raise funds from the innocent public through dubious schemes.
Referring to the implementation of the Malegam Committee Report in the context of regulating micro finance institutions (MFIs), he said all unincorporated MFIs would be regulated by the proposed central legislation uniformly across the states while incorporated MFIs will be regulated by the RBI.
The meeting also deliberated on issues like management of cash balances and market borrowings of the state governments for 2011-12, repayment / exchange rate risk in states' borrowing and building of sinking funds to meet these obligations, risks to state finances on account of power sector utilities, issues concerning regulation of MFIs, financial inclusion through business correspondents, roadmap for regulation of state government owned NBFCs, switchover to electronic mode of payment and receipt for government's banking business and proposed classification structure of union and state governments' accounts.
