Even as Finance Minister Pranab Mukherjee on Tuesday hailed the Reserve Bank’s monetary policy stance of maintaining status quo in key rates, he said that the apex bank’s projection of six per cent GDP (gross domestic product) growth this fiscal was far too conservative and he would rather go by the estimates of the Prime Minister’s Economic Advisory Council (PMEAC).
“[The] RBI always makes very hard and conservative assessment... The GDP growth I am inclined to accept [is] the figure of [the] Prime Minister’s Economic Advisory Council, headed by C. Rangarajan, that means from 6.5 to 6.75 per cent… Of course, the assessment of the RBI on the whole is in conformity with the government’s own thinking on both fiscal policy as well as monetary policy,” Mr. Mukherjee said while interacting with the media on quarterly monetary policy review measures.
To a query on whether the stimulus measures would continue, especially when the RBI is signalling a reversal to tight-money policy in the near future, Mr. Mukherjee said: “As I mentioned [earlier], that until the economy is on a firm recovery path, it will continue.”
Price spiral
On the greater challenge of tackling inflationary pressures — with the RBI scaling up Wholesale Price Index-based inflation to 6.5 per cent by the fiscal year-end from five per cent estimated earlier — Mr. Mukherjee pointed out that the government had taken steps to ensure that the adverse impact of the price spiral was reduced by strengthening the supply-side management.
Listing the steps taken in this regard, the Finance Minister said that commodities in short supply were being imported and despite the likely shortfall in kharif crop production, there would be no shortage of foodgrains as the stocks were sufficient.
Mr. Mukherjee, however, admitted that until the global economies recovered — particularly in Europe and the U.S. — the prospect of robust export growth was unlikely. “But the encouraging trend is that the rate of decline which was very high in the earlier months has reduced though it still continues to be negative,” he said. As for the overall scenario, Mr. Mukherjee said: “On the whole, the economy, I would like to say, is responding well to the policy statement which we have initiated. The RBI and the Ministry of Finance are working in close cooperation and this will continue in future.”
