As advance estimates by the statistics office for growth in gross value added (GV) came much below the Reserve Bank of India's (RBI) projections for 2017-18, officials in the Central Statistics Office (CSO) point to an assessment by a Monetary Policy Committee (MPC) member who said the central bank had overestimated the numbers, ahead of the December policy review.
Another official in the finance ministry said the assessment by the member, R Dholakia, was correct so far as the issue of cut in the policy rate was concerned.
Dholakia, a professor of economics at IIM-Ahmedabad, had pitched for a 25 basis points (bps) rate reduction in the December meeting. He had also predicted the fiscal deficit mightexceed the target of 3.2 per cent of Gross Domestic Product this year, with nominal growth to grow slower than expected. Inflation remains under reasonable control, he had argued. However, RBI had retained the policy rate at the same level.
This brings back the divide between government and RBI over rates. Chief economic adviser Arvind Subramanian had in the second volume of the Economic Survey for 2017-18 said RBI got its inflation projection wrong by more than 100 bps for six of the past 14 quarters.