Impact on growth only in short run: Pranab

Finance Minister Pranab Mukherjee said the tightening measures announced by the Reserve Bank of India (RBI) today might have a slightly negative impact on the growth rate in the short term. In the medium to long term, however, it would boost economic growth.

While recognising the various pressures that RBI had to contend with, he said: “There are times when all informed observers have a common view of what the imperatives of monetary policy are. In such times, the RBI's decision is easy. Today is not such an easy time. The signals from the economy have been mixed.” He pointed that industrial growth showed some signs of deceleration in August, while inflation was still not in the comfort zone.

Mukherjee said RBI's moves were in sync with the government's strategy.

“I am glad that RBI has risen to the challenge and used a very careful combination of policies to complement what the Government of India is doing to steer our economy to grow better and harness inflation,” he said in a statement this evening.

Echoing the sentiments, Finance Secretary Ashok Chawla told reporters that RBI had done a balancing act aimed at taming inflation without hurting economic growth.

“This adjustment (by RBI) is a good balance between responding to inflationary concerns, which is very important, and at the same time not doing anything that would in a serious way disrupt growth,” said Planning Commission Deputy Chairman Montek Singh Ahluwalia.