That Reserve Bank of India Governor D. Subbarao and Finance Minister P. Chidambaram are not on the same page on the growth-inflation dynamic has been known for months now. But the sharp differences in perception came to the fore on Tuesday when the RBI, despite the government’s fiscal consolidation road map unveiled a day before, chose to keep the key policy repo rate unchanged in view of high inflation and Mr. Chidambaram decided to “walk alone” to face the challenge of growth.
“Growth is as much a challenge as inflation. If the government has to walk alone to face the challenge of growth, then we will walk alone,” said an apparently upset Finance Minister in his comments to the apex bank’s second quarter policy review, an event that both India Inc. and the markets had been eagerly looking forward to, for its announcement on easing interest rates to boost investor sentiments and spur growth.
At his press conference on Monday to unveil the five-year fiscal consolidation plan marking acceptance of the Kelkar Committee recommendations, Mr. Chidambaram made it abundantly clear that he would like to see reciprocal action on the part of the RBI by easing interest rates and working in tandem with the government to push growth.
“Well, I am making the statement so that everybody in India acknowledges the steps which we are taking. And also acknowledges the government is determined to bring about fiscal consolidation. And I sincerely hope that everybody will read the statement and take note of that...” he had said when queried on the timing of his announcement.
