Book value method to assess savings should stay: Rangarajan

Book value method to assess savings should stay: Rangarajan
PTI
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First Published: Tue, Mar 17 2009. 03 14 PM IST
Updated: Tue, Mar 17 2009. 03 14 PM IST
New Delhi: The Rangarajan Committee, which looked into aggregate savings in the country, has recommended against switching to a system of estimating corporate savings on the basis of prices prevailing in the market from the one based on book value.
“(The) High-level committee feels that savings estimates on (a) mark-to-market (MTM) basis may not be apt as it may lead to wide fluctuations from one reporting period to the next even when the underlying fundamentals do not change,” the committee said in its report submitted to the government yesterday.
Moreover, the absence of a liquid market for various types of assets also makes such estimation inappropriate, it said. One of the terms of reference of the committee was to examine if corporate saving estimation should be done on MTM basis.
MTM refers to the present value of assets based on their market prices.
The eight-member committee was constituted on 12 December, 2007, to critically review the existing methodologies used to estimate saving and investment aggregates for the Indian economy.
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First Published: Tue, Mar 17 2009. 03 14 PM IST