RBI needs to stimulate growth while containing inflation: FM

RBI is slated to announce its Q3 review of monetary policy on Jan 29

Ahead of next week's monetary policy, Finance Minister P Chidambaram today said Reserve Bank of India (RBI) must strike a balance between needs of pushing growth and controlling inflation.

"I don't manage RBI. I just convey the views of the government. It is for RBI to take a call. Our stated position is that RBI must balance between the needs of stimulating growth and containing inflation," he told PTI.

RBI is slated to announce its third quarter review of monetary policy on January 29 amid demands by the industry that it should lower interest rates to boost industrial output, which contracted by 0.1% in November.

Before announcing the policy, the RBI Governor holds a customary meeting with the Finance Minister.

In order to contain inflation, the RBI has refrained from lowering interest rates despite nudging by Finance and Commerce ministries that it should take steps to address concerns on growth.

Inflation based on wholesale prices declined to a three-year low of 7.18% in December.
However, retail inflation rose for the third successive month in December at 10.56%. The Mumbai-headquartered central bank has at many occasions said inflation should be at around 5%.

The Indian economy grew by 5.4% in the first half (April-September) of the current fiscal, against 7.3% in the corresponding period last year.

In its December policy review, the RBI had kept the key interest rate (repo rate) unchanged on concerns of inflation, but provided sufficient hints that it would reduce it in January.

The central bank has kept its policy rates on hold since April when it had last lowered the repo rate by 0.50%.