Full MSP rollout to put fin system under stress: Rangarajan

Former Reserve Bank Governor C Rangarajan on Thursday said the full implementation of recent hike in Minimum Support Prices (MSP) for some of the agricultural products may push financial system "under stress."

Speaking at the Eighth Convocation Ceremony of ICFAI Foundation for Higher Education here, Rangarajan also said any steep rise in crude prices can pose severe problems for India's balance of payments.

"The trade war can get worse. Any steep rise in crude prices can pose severe problems for our balance of payments. The banking system is still under great stress. For a strong growth, we need a strong banking system. The financial system can come under stress if some of the new commitments such as the full implementation of new MSPs for agricultural commodities are to be fulfilled. Much depends on good governance," Rangarajan said.

The government recently hiked the minimum support price for paddy by a steep Rs 200 per quintal as it looked to fulfil its poll promise to give farmers 50 per cent more rate than their cost of production.

The former chairman of Prime Minister's Economic Advisory Council said the economy is expected to grow little over 7 per cent.

"The India economy after performing below potential for nearly four quarters beginning last quarter of 201617 showed a strong pick up in the last quarter 2017-18. The expectation is that the overall growth in 2018-19 will be the little above 7 per cent. How much higher over 7 per cent depends on a number of factors. The external environment is disturbing," he opined.