PM discusses economy before monetary review

As inflation remained stubbornly high despite successive rate increases by the Reserve Bank of India, Prime Minister Manmohan Singh on Saturday held consultations with the central bank governor, D Subbarao, just 10 days ahead of monetary policy.

Planning Commission Deputy Chairman Montek Singh Ahluwalia and Prime Minister’s Economic Advisory Council Chairman C Rangarajan also attended an “informal, in-house” meeting, where Singh discussed the current state of economic affairs. Officials said the meeting discussed the current macro economic situation, but refused to divulge details.

Despite 12 rate hikes by RBI, inflation has refused to go below 9 per cent in 2011 till September.

In September, it moderated a bit but stayed at the elevated level of 9.72 per cent.

However, they brought down economic growth parameters. India’s GDP growth posted six-quarter low of 7.7 per cent in the first quarter of this fiscal. Besides, signs for economic growth in the second quarter are not robust. Industrial growth stayed below 5 per cent in the first two months of the second quarter.

Also, HSBC purchasing managers’ index for services contracted in September for the first time since April 2009, which was a period of global financial crisis. HSBC PMI for manufacturing was also close to contraction in September to stand at 50.4 per cent. Any figure below 50 points is a contraction.

As such, economists and chambers have asked RBI to revisit its tight monetary stance. However, both Subbarao and his deputy K C Chakrabarty gave enough hints in the last couple of days of continuing tight monetary stance. RBI is slated to come out with its monetary review on October 25.