FM to meet Subbarao for RBI policy review on July 23

The central bank is expected to raise key rates by 25 basis points.

Finance Minister Pranab Mukherjee will meet Reserve Bank of India (RBI) Governor Duvvuri Subbarao on July 23, ahead of RBI’s first quarter review of monetary policy.

“First of all, I cannot comment on the policy which is coming. RBI is entitled to formulate its policy. Of course, the central bank consults the finance ministry. On 23rd, I have this meeting,” Mukherjee told reporters on the sidelines of his meeting with chief ministers of northern states and heads of state-owned banks here.

RBI will announce its first policy review on July 27.

In a surprise move, RBI had raised repo and reverse repo rates by 25 basis points each on Friday. It is now widely expected to raise key policy rates by the same quantum in the upcoming policy review.

Mukherjee said the recent hike in fuel prices may raise the headline inflation rate by around one percentage point.

“It (fuel price hike) is on the basis of recommendations of the Kirit Parikh panel... After this move, the impact on inflation will be a little less than one percent.”

The government had last month freed prices of petrol and linked them to market rates. This led to an immediate rise of Rs 3.5 a litre in petrol prices. Diesel prices were partially freed, with a hike of Rs 2 a litre.

Prices of kerosene and cooking gas were also hiked by Rs 3 a litre and Rs 35 per 14.2 kg cylinder, respectively.

Need to ensure timely credit for productive sectors
The government must enable timely credit to productive sectors to ensure economic growth, Mukherjee said.

“It is my wish that the productive sectors of the economy receive timely credit so that economic production is not impeded,” Mukherjee said.

He urged the State Level Bankers Committee to regularly ensure timely credit to productive sectors.