Subbarao meets FM for pre-policy consultation

Reserve Bank of India (RBI) Governor D Subbarao today met Finance Minister Pranab Mukherjee, ahead of the central bank’s Monetary Policy Review on January 29. The meeting assumes significance since budget consultations are also in the full swing. Besides, a rollback of the stimulus measures is being debated.

After the meeting, Subbarao did not react to queries on whether inflation that touched 7.31 per cent in December had breached the RBI’s comfort zone. The bank had predicted inflation rate touching 6.5 per cent by March-end. With food inflation touching record a 10-year high in December and 17.28 per cent during the week ended January 2, RBI is expected to restrict money supply through an increase in policy rates.

The RBI input in the budget consultations would also be crucial since the government is looking at a gradual rollback of stimulus measures. With the economy growing 7.9 per cent in the second quarter ending September 2009 and by 7 per cent in the first half of 2009-10, the case for withdrawing stimulus was strengthened, though experts warned the growth was still fragile and it largely depended on stimulus.

In a separate function, President Pratibha Patil released a stamp commemorating RBI’s platinum jubilee this year. The Reserve Bank of India started functioning on April 1, 1935, making 2009-2010 its 75th year.

Mukherjee commended the bank’s role in battling the recent financial crisis. In his address at the function, he said by responding to the evolving situation quickly, effectively and responsibly, RBI has helped the country in mitigating the impact of the crisis.