Millennium Post

Rajan meets PC ahead of Q2 monetary policy review

‘I discussed whole set of issues with the finance minister including state of economy,’ Rajan told reporters after the meeting.

Rajan, who was chief economic advisor in the Finance Ministry before taking over as Reserve Bank of India Governor on September 4, is scheduled to announce the second-quarter monetary policy review on October 29.

High inflation offers Rajan limited scope to cut key rates as demanded by industry to spur growth. Rising food prices, especially of onion and other vegetables, pushed up September inflation to a seven-month high of 6.46 per cent.

The Wholesale Price Index (WPI)-based inflation,too, rose for the fourth month in a row. Inflation was 6.1 per cent in August and 5.85 per cent (revised upward from 5.79 per cent) in July.

In September last year, it was 8.07 per cent. The sharpest increase was in onion prices which jumped by 322.94 per cent in September, over the same month last year. In its last policy review on September 20, a hawkish Reserve Bank of India raised the policy rate by 0.25 per cent as it kept its focus on controlling inflation.

The repo rate or the short term lending rate has been increased by 25 basis points to 7.5 per cent from 7.25 per cent.

At the same time, the central bank is faced with the issue of moderation in growth. The government measures on economy are showing results and government will continue to take measures,’ Economic Affairs Secretary Arvind Mayaram said.

Earlier this month the World Bank slashed India’s economic growth forecast for the current financial year to 4.7 per cent from an earlier projection of 6.1 per cent.

The International Monetary Fund (IMF), in its World Economic Outlook, projected an average growth rate of about 3.75 per cent for India in 2013-14 which is expected to pick up to 5.1 per cent next year.
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