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Bimal Jalan says economy is fine and growing well

The Indian economy has shown the capacity and potential of fast-growing economy, according to Reserve Bank of India governor Bimal Jalan.

''Despite domestic and international problems and frequent elections, India has shown its capacity as a fast growing economy,'' Jalan said.

The growth rate is between six and 6.5 per cent of GDP, inflation has touched a record low and the foreign exchanges reserves are good. The economy is managed in a better way, he said and added that the fundamentals of the economy are strong.

Toughest accounting and auditing procedures necessary

Jalan called for toughest accounting and auditing procedures and asked the Indian system of accounting to switch over to the world practices in a phased manner.

''Take some time, say five years or six years, but over a period of time, move to the toughest of accounting and auditing practices,'' Jalan said, delivering a keynote address at a seminar of financial and capital markets organised by the Bombay Chartered Accountants' Society.

''World over, we should be known for having the toughest standards, and this is a challenge before all of us,'' the governor suggested to the gathering of chartered accountants.

The Reserve Bank of India feels that the chartered accountants and auditors should conform to and help in formulating toughest norms.

He also called for strict ''disclipinary standards'' and said it should be the duty of the accounting and auditing community to see that they adhere to toughest of disclipinary mechanism.

''It is a matter of utmost importance and there should be a method of deterrence so that people follow disclipinary standards,'' he said.

''We have to go a long way in refining the system as far as transparency and accountability are concerned,'' he said. ''Move to a system which will have signals at several places, not cops at each corner to monitor everything,'' he said, adding, ''Formulate a highway and freeway on your own to ensure speedy drive.''

Jalan pointed out that what was urgently needed is to develop a system to strict internal auditing also. ''The asset-liability management and the balance sheet should be upto the mark and this is possible with strict internal mechanism.'' He described adherence to strict internal audit norms as one of the major challenges of the financial sector.

The RBI governor said that speed and increased volume of transactions is going to be the major challenge before the banking and financial sectors in the years to come. ''Domestic financial market reforms and external management are the areas to be given more importance,'' he said.

Jalan pointed out that the international attention is on reforming the financial markets and the banking sector. Be it the World Bank, International Monetary Fund, Bank of International Settlement or the Group of 20 -- all the international agencies are now focussing attention on these two important and crucial areas.

''Development of the banking and financial sector is no longer a domestic issue and the whole world is focussing on it,'' Jalan said. ''Weakness of the financial sector has led to the East Asian crisis,'' he said, and added that weaknessess of the sector needs to be removed over a period of time and all the international meets related to economic reforms are unanimous over it.

Jalan said that transparency will ensure profitability and enhance investors' confidence. He said that the foreign investor will feel confident when he is sure of the fact that India follows the toughest of accounting and auditing practices.

'Self-regulatory mechanism needed for NBFCs'

Jalan also suggested the need for a ''self-regulatory mechanism'' for overseeing the functioning of small non-banking finance companies.

''A self-regulatory supervisory system for the small NBFCs could be evolved,'' Jalan said.

He said that the small NBFCs play a major role in Indian economy as far as financing is concerned on a local basis. ''Locally, these bodies play an important role and hence a self-regulatory mechanism will be well suited,'' he added.

UNI

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