RBI tight monetary policy may not have to be extended
Kolkata: Finance Minister Pranab Mukherjee today expressed hope that the RBI may not continue with its tight monetary policy as it may have implications on economic growth.
"I feel that the existing monetary policy of reigning in inflation may not have to be extended… If the monetary policy is extended, there will be an overall impact on the growth scenario. I am optimistic that the present monetary stance will not have to be extended," Mukherjee said at a CII event here.
In its bid to tame inflation, RBI has hiked policy rates 11 times since March 2010. The overall inflation, which crossed 9 per cent mark in December, stood at 9.22 per cent in July.
However, with higher cost of borrowing and slowing project investments, the GDP growth for the April-June quarter (Q1) slipped to a 18-month low of 7.8 per cent. In the corresponding period last year, it was 8.8 per cent.
Referring to slowing of GDP growth in the April-June quarter, the Finance minister said, "it is disappointing but not totally unexpected… If the monsoon is good, then GDP will be better."
Mukherjee further said that good monsoon would help bring down food inflation to 6-7 per cent by March end. After a gap of over five months food inflation jumped to double-digits. It was at 10.05 per cent for the week ended August 20, as onion, fruits, vegetables and protein-based items turned more expensive.
"I hope good monsoon and elimination of seasonal factors will bring down food inflation to single digit. By the end of the year, it should be around six to seven per cent," Mukherjee added.