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RBI will consider deflation while deciding interest rates: Jayant Sinha

Sinha said slow growth, excess capacity, declining population and increase in labour force are responsible for deflationary trend globally

Press Trust of India  |  New Delhi 

Jayant Sinha
Jayant Sinha

The Reserve Bank will take into account the domestic and global deflationary trend and take appropriate action on interest rate, Minister of State for Finance said Thursday.

"We have to be very mindful and watchful of that (deflation) and that will be put into account when considers its monetary policy," he told reporters on the sidelines of an event here.

is scheduled to come out with its bi-monthly policy review on September 29; pressure is mounting on the central bank to to boost economic

On whether could announce a before September 29, Sinha said, "Of course, RBI takes into account all of that data and (RBI Governor Raghuram) Rajan, I am sure, will apply his judgement to all of these matters."

RBI has cut by 0.75% so far this year in three tranches. It refrained from reducing the rate further in the last bi-monthly monetary policy in August.

Talking about deflation, a concern which was flagged by Chief Economic Advisor Arvind Subramanian on Wednesday, Sinha said slow growth, excess capacity, declining population and increase in labour force are responsible for deflationary trend globally.

"These are powerful deflationary forces that are at work in the global economy. India of course remains a very bright spot in the global economy because we have growth, we have some inflation and we have a very robust underlying demand trends," Sinha said.

He also expressed optimism that India will achieve 8% rate in the current financial year, although the in the first quarter was only 7%.

"Some of the public investment that we are ramping up now and hopefully a reasonable monsoon...Will enable us to achieve the 8% growth rate," Sinha said.

Subramanian had on Wednesday said that is a new challenge for the economy but expressed hope that the growth would be close to 8% in the current fiscal year.

When asked about the comments of American investor Jim Rogers, who has withdrawn investments from India, Sinha said "If you look at what is happening on a variety of different dimensions, whether it is public investment, whether it is capex, whether it is the growth in consumption, indirect taxes, capital flows into India relative to other countries - I think the perception would be different."

Rogers has told media that he was exiting India as reforms were not substantial enough to push the stock markets.

First Published: Thu, September 03 2015. 14:28 IST