RBI Gov meets FM ahead of policy; discusses economy

Ahead of the annual monetary policy meet on April 20, Reserve Bank of India (RBI) Governor D Subbarao today held consultations with Finance Minister Pranab Mukherjee and discussed the macro-economic situation.

"I have come to review the macro-economic situation with the Finance Minister as is customary. You will know our policy action when we do the review on Tuesday, April 20," Subbarao told reporters.

The RBI will announce annual monetary policy for 2010-11 amid concerns over inflation, which rose to 9.9 per cent in March, very close to the psychological double-digit level. The food inflation is hovering around 17 per cent and it is feared that it could spill over to the non-food sector.

The wholesale price-based inflation at 9.9 per cent was much above the RBI's year-end projection of 8.5 per cent.

Among others who were present at the review meeting were Finance Secretary Ashok Chawla and Chief Economic Adviser Kaushik Basu.

The central bank in its annual policy will have to draw a balance between the competing needs of pushing growth and taming inflation.

Concerned over inflation, RBI raised repo and reverse repo rates (short-term lending and borrowing rates) by 25 basis points to 5 per cent and 3.5 per cent to check rising prices in March.

With the inflation nearing the double digit level, analysts expect the central bank to further tighten monetary policy by raising key ratios and rates.

Basu, too, while talking to reporters earlier in the day said, "I believe inflation is still high... Still of concern. We do need policies for that (containing it)."

Prime Minister's Economic Advisory Council (PMEAC) member Suman K Bery, yesterday, said, "It is important for them (RBI) to signal concerns for inflation. I do expect some tightening in Tuesday's monetary policy."

Bery said that the central bank "should be signalling concern (on rising inflation) but not panic... The RBI would be within its rights to signal hawkish, but act dovish".

As regards the economic growth, it is likely to increase to 8.5 per cent during the current fiscal from 7.2 per cent estimated in 2009-10.