Recapitalisation is capital transaction which won't increase inflation: Arvind Subramanian

New Delhi [India], October 24 (ANI): Chief Economic Advisor Arvind Subramanian on Tuesday said that recapitalisation is a capital transaction and not a current transaction, which will not increase inflation.

Speaking at the conference held by Finance Minister Arun Jaitley, Subramanian said, "Essentially, recapitalisation is a capital transaction not a current transaction. It is not going to increase the inflation. The government issuing more bonds will make a demand on savings in the household and private sector."

He added that the government needs many weapons like interest rates, recapitalisation, demand, etc.

Earlier in the day, Union Finance Minister Arun Jaitley had announced unprecedented PSU banks recapitalisation programme of Rs. 2.11 lakh crore, out of which Rs. 1.35 lakh crore would come from recap bonds, and rest from the markets and budgetary support.

"To improve the lending capacity of the banks, we have announced the recapitalisation programme, which is essential to increase public spending on infrastructure, and that expenditure on infrastructure," Finance Minister Arun Jaitley said, at a conference here.

Adding to this, he said that there is a need to increase public investment for which bold steps by the government will be taken to recapitalise banks in the country.

However, speaking about the current economic situation, Jaitley said that India has remained the world's fastest growing economy for the past three years, thus maintaining very strong economic fundamentals with a progressive growth story.

"There are strong macroeconomic fundamentals," Finance Minister Arun Jaitley said, while addressing a media conference.

"We will report on the situation as they develop. A lot of internal meetings on the state of economy internally within the ministry were held. Discussions were also held with the prime minister. But India has remained one of the fastest growing economies in the world," said Jaitley.

He added that government has decided on the steps needed to sustain the growth momentum. (ANI)