Growth may moderate, inflation a major challenge: Pranab (Lead)
June 17th, 2011 - 9:30 pm ICT by IANS
New Delhi, June 17 (IANS) The monetary tightening policy pursued by the Reserve Bank of India might moderate growth in short-term even as controlling inflation remains a major challenge for the government, Finance Minister Pranab Mukherjee said here Friday.
“Monetary measures may moderate growth rate in the short-term if it continues,” Mukherjee said while addressing a banking conclave organised by industry forum Assocham here.
Mukherjee said controlling rising prices was a major challenge for the government and the Reserve Bank of India (RBI) - the country’s central bank - as inflation had remained stubbornly high despite a series of fiscal and monetary measures.
“Inflation remains a major challenge for the government in short-term. It has implications on sustaining growth momentum,” said Mukherjee.
However, the finance minister said that medium term growth prospects continued to remain buoyant.
The RBI Thursday hiked repo rates by 25 basis points in a bid to curb inflation and indicated that more such increases were in the offing.
With more such hikes on the horizon, industry has been clamouring to policy makers to hold off more increases in key interest rates, saying it was hurting capacity expansion and making cost of operations go up.
“In the past few weeks we have taken measures to address inflation concerns. The monetary policy has been gradually tightened and at the same time, new initiatives were announced in the union budget to address some of the bottlenecks in the food supply chain,” Mukherjee said.
The finance minister, however, was hopeful of still meeting growth targets in spite of the recent industrial output slowdown. The government had set 8.75 percent (with a margin of 0.25 percent) as the gross domestic product (GDP) growth target for the current fiscal.
“Industrial growth has slowed down recently. But the overall growth targets remain intact for the current fiscal,” he said.
Mukherjee also said GDP had accelerated at a fast pace in the last fiscal because of increased government spending but it had come at a cost of high fiscal deficit.
“We have to bring fiscal discipline. If high deficit continues at this time, it will be disastrous,” said Mukherjee.
He said the government would target 9 to 9.5 percent growth for the Twelfth Five Year Plan period (2012-17).
- Monetary tightening may moderate growth: Mukherjee - Jun 17, 2011
- Inflation still at 'unacceptable' level: Pranab - Dec 15, 2011
- After petrol prices, higher interest rates set to bite - Sep 16, 2011
- Inflation forces another rate hike by India's central bank (Second Lead) - May 03, 2011
- Shifting focus to growth, RBI infuses Rs.320 bn into system (Roundup) - Jan 24, 2012
- Inflation will come down to 7 percent by March: RBI - Oct 25, 2011
- Highlights of Indian central bank's monetary policy update - Jul 26, 2011
- Inflation forces India's central bank to hike rates again (Roundup) - May 03, 2011
- Rate hike will bring down inflation to 6 percent: Pranab - Jul 26, 2011
- Apex finance panel agrees with RBI rate hike - Jul 27, 2011
- Rate pause will help regain growth momentum: Pranab - Dec 16, 2011
- Rate hike will hurt growth, feels India Inc - Jul 26, 2011
- Rate hikes not curbing inflation, only hampering growth: Industry - Sep 16, 2011
- Easing of rates depends on future inflation, growth: RBI - Jan 23, 2012
- India's central bank to review monetary policy Tuesday - Oct 29, 2010
Tags: bank of india, basis points, capacity expansion, finance minister, food supply, gdp growth, government finance, growth momentum, growth prospects, growth target, growth targets, industry forum, inflation concerns, moderate inflation, monetary measures, pranab mukherjee, repo rates, reserve bank of india, s central, union budget