Apex finance panel agrees with RBI rate hike

July 27th, 2011 - 8:54 pm ICT by IANS  

Pranab Mukherjee New Delhi, July 27 (IANS) An apex panel of financial sector regulators, headed by Finance Minister Pranab Mukherjeee, Wednesday agreed with the latest Reserve Bank of India’s (RBI) rate hike and said tackling inflation was necessary.

“The general consensus was that while inflation may not be conducive to short-term economic growth, India’s medium to long-term economic growth prospects remain bright,” said a note from the finance ministry after the meeting of the Financial Stability and Development Council (FSDC).

“In the short-term, it is necessary to tackle inflation,” it added.

The Reserve Bank of India hiked the repo rate by an unexpected 50 basis points, resulting in an outcry from corporate India.

The FSDC comprises of the RBI governor, the finance secretary, chairman of Securities and Exchange Board of India (SEBI), chairman of the Insurance Regulatory and Development Authority (IRDA), chairman of the Pension Fund Regulatory and Development Authority(PFRDA), and other senior officers of the finance ministry.

The council said that the levels of investments as a percentage of the gross domestic product (GDP) was encouraging.

“This should help growth prospects of the nation. The provisional tax collection figures for the first quarter of current fiscal are also encouraging and they give reason for optimism on growth and meeting the fiscal targets,” the FSDC said.

The government is targeting a growth of 8-8.5 percent this fiscal and a fiscal deficit of 4.6 percent of the GDP.

However, analysts and even the RBI are doubtful that the government will be able to achieve any of these targets.

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