Finance Minister Pranab Mukherjee on Sunday expressed hope that the Reserve Bank of India (RBI) might not continue with its tight monetary policy. He also said any hard measures in this regard would impact the overall growth scenario.
“As far as tightening monetary policy is concerned, if these policies need to be extended, then it will have some impact on overall growth scenario. But I am optimistic that it will not have to be extended,” Mukherjee said at an interactive session here.
He also indicated food inflation was likely to come down if the country had a good monsoon and measures taken by the government to arrest supply-side problems, and would finally settle between six and seven per cent.
“It is true that food price inflation has again reached a double-digit figure of above 10 per cent in the last week compared to more than eight per cent in the previous week. I believe it will come down to single digits and by the end of the financial year, it may be around six-seven per cent,” he said.
According to a commerce and industry data released last Thursday, the wholesale price index-based inflation stood at 10.05 per cent for the week ended August 20, as against 9.8 per cent in the previous week.
When asked about the continuous rise in interest rates, he said, “It is not possible at this moment to ease the tightening.” While showing his “disappointment” over the lower GDP figures for the first quarter of this financial year, he said that it was not “unexpected”. The GDP growth for the quarter dropped to 7.7 per cent, as compared to 8.8 per cent during the same period last financial year.
The drop in GDP figures was mainly due to a slowdown in industrial growth during the first two months of the quarter. “IIP growth was 5.8 per cent in April and 5.6 per cent in May, which got reflected in GDP figures along with other factors,” he said.
Meanwhile, he also expressed hope that though the present global financial crisis was a matter of concern, India should come out of it stronger, as it did in 2008. He added that the fiscal expansion that the government undertook in 2008-09 was having an impact on inflation on the other hand had arrested further deceleration in the economy.
On the other hand he urged the political class to have consensus over issues like the Goods and Services Tax and Direct Tax Code. “We need larger section of the society to participate on this and here the industry can play a vital role. Now, relationship between industrialists and political parties has assumed great importance,” Mukherjee said.