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Our Bureau

New Delhi , May 17

THE Finance Minister, Mr P. Chidambaram, today said that a new comprehensive policy framework for the financial sector is in the works. The new policy, which would cover banking, pension, insurance and capital market, is expected to be ready by September.

Addressing the annual session of the Confederation of Indian Industry, the Finance Minister sought industry's support in formulating the policy. He urged industry to hold dialogue with political parties, State Governments, trading and exporting communities and the banking sector to ensure that its views were taken into account.

Mr Chidambaram said policies in the financial sector were still evolving whereas the policy matrix was more or less complete in manufacturing, trading, services exports and taxation.

"Once the policy matrix (for financial sector) is complete, we must back it up with appropriate legislation so that all uncertainties that surrounds the financial sector reforms are put at rest in the first half of the current financial year itself," he said.

Making out a case for outward-looking policies on foreign direct investment, foreign institutional investment, tourism, services exports and remittances, Mr Chidambaram said this was required to ensure that inflows from these sources grew at a pace that could balance the swelling trade deficit. "We have taken the rising trade deficit in our stride thanks to remittances and invisibles. But our exports must grow faster even though last year we had a staggering growth.

"The $30-billion trade deficit can be sustained only when there are matching inflows. There must be corresponding increase in remittances, invisibles and services exports. This would ensure that trade deficit does not become an albatross around India's neck," he said.

On the issue of achieving "double-digit inclusive growth'', Mr Chidambaram held that this could be possible when the revenue deficit was wiped out and the fiscal deficit was curtailed. He hinted that the strategy for fiscal consolidation would have to be revenue-led rather than being expenditure control centric.

"Unless tax revenues grow and the tax-GDP ratio grows, there is no way in which the fiscal deficit and revenue deficit can be bridged even if we exercise the strictest control on expenditure," Mr Chidambaram said.

On expenditure control, the Finance Minister said that he would on Tuesday, for the first time during the current financial year, take a meeting with the Financial Advisors of Ministries. "I intend to meet them once every quarter to exercise the utmost discipline as far as expenditure was concerned," he said.

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