Rain gods likely to shower blessings this year: FinMin

Jaitley dispels fears of uptick in food prices, growth trajectory up

The government on Sunday sought to dispel fears of an uptick in food prices from concern over scanty rainfall, saying macroeconomic parameters like financial and current account deficit (CAD) were in good shape.

"It appears the rain gods might be kinder this year to us than they were last year," Finance Minister Arun Jaitley said, while speaking at a seminar organised by Nabard.

"India's financial deficit and CAD are coming under control. Inflation is also under check," he added.

Consumer Price Index (CPI) inflation rose to a three-month high of 5.01 per cent in May, compared with 4.87 per cent in April. However, retail food inflation eased to 4.80 per cent from 5.11 per cent in April. A year ago, it had stood at 8.89 per cent. The June CPI inflation data is due this week. This would be the last retail inflation data before Reserve Bank of India's (RBI) bi-monthly monetary policy statement on August 4.

The Narendra Modi-led Bharatiya Janata Party (BJP) government, which came to power last year on the promise of initiatives, reforms and reviving growth, said the country is now aiming for eight to 10 per cent annual growth.

"With the ongoing reform process, with more measures like Goods and Services Tax in the pipeline, increased infrastructure spending this year, emphasis on smart cities... When all these initiatives add up, then India's aspiration to cross the eight per cent hub and get on to the eight to 10 per cent growth targets might not be completely out of sight, but something eminently achievable," Jaitley said.

The finance minister also expects rainfall to be better this year compared to the previous year, which is the key to contain food prices. He also highlighted that prices of items like pulses and oilseeds are likely to go up, which could allay fears of price rise.

"The department of agriculture has informed me that, with better rainfall in most parts of the country, even pulses, which at the moment is a cause of concern with one-item inflation, productivity of oilseeds this year is likely to be much higher. I hope their estimates turn true," he said.

Data from the India Meteorological Department showed between July 2 and July 8, India received around 30.1 mm of rainfall as against a normal of 61.4 mm.

Jaitley sounded satisfied on the financial front as revenue collection has been promising.

"On Saturday, when the indirect revenue data came out for the first quarter, they did indicate that customs and excise duty, service tax - even without additional revenue measures - were up 14.5 per cent. If you take the additional revenue measures, they were up 37 per cent, the silver lining being, the revenue situation is a lot more comfortable with all these measures compared to past year's," he said.

Improvement in the macroeconomic parameters like inflation and financial deficit will give more room to RBI for easing of monetary policy. The RBI had set an inflation target of less than six per cent by January 2016 and four per cent (+/- 2) by the end of two years, starting in 2016-17.

Since the start of this year, RBI had cut the repo rate (or the rate at which banks borrow from the central bank) by 75 bps to 7.25 per cent.

The central bank will review its next policy on August 4.