Monetary tightening may moderate growth: Mukherjee
June 17th, 2011 - 1:53 pm ICT by IANS
New Delhi, June 17 (IANS) Continued monetary tightening by the Reserve Bank of India might moderate growth in the short-term but the long-term prospects remained buoyant, Finance Minister Pranab Mukherjee said Friday.
“Monetary measures may moderate growth rate in the short-term if it continues,” Mukherjee said while addressing a banking conclave organised by Assocham.
However, the Finance Minister said that medium term growth prospects continued to remain buoyant.
Reserve Bank of India 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 policy makers to hold off more increases in key interest rates saying it was hurting capacity expansion and making cost of operations go up.
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,” said Mukherjee.
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.
Commenting on high inflation, Mukherjee said it was mainly due to mismatch in supply and demand.
- Growth may moderate, inflation a major challenge: Pranab (Lead) - Jun 17, 2011
- Apex finance panel agrees with RBI rate hike - Jul 27, 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
- With inflation easing, India's central bank halts rate hikes (Roundup) - Dec 16, 2011
- Rate hike will hurt growth, feels India Inc - Jul 26, 2011
- Inflation still at 'unacceptable' level: Pranab - Dec 15, 2011
- Highlights of Indian central bank's monetary policy update - Jul 26, 2011
- Inflation will come down to 7 percent by March: RBI - Oct 25, 2011
- Inflation forces India's central bank to hike rates again (Roundup) - May 03, 2011
- With reforms under stress, India stares at ratings cut (Roundup) - Apr 25, 2012
- India's central bank halts rate hikes on lower inflation (Lead) - Dec 16, 2011
- Rate hikes not curbing inflation, only hampering growth: Industry - Sep 16, 2011
- Indian economy hit by high inflation, slowing growth (2011 in Retrospect) - Dec 28, 2011
- Shifting focus to growth, RBI infuses Rs.320 bn into system (Roundup) - Jan 24, 2012
Tags: bank of india, basis points, capacity expansion, conclave, finance minister, fiscal deficit, fiscal discipline, gdp growth, government spending, gross domestic product, growth prospects, growth target, growth targets, mismatch, monetary measures, pranab mukherjee, repo rates, reserve bank of india, slowdown, term prospects