Millennium Post

Reserve Bank’s mandate is not only stable prices but also growth: PC

A day ahead of the Reserve Bank of India’s (RBI) monetary policy review, Finance Minister P Chidambaram on Monday said  that the mandate of a central bank is not only to ensure price stability but also to promote growth and generate employment. Stating he did not expect any hike in interest rates by the commercial banks, the Minister said they had enough funds to meet  credit demands and that the onus of coming up with large investment projects rests with the industry.

'All over the world thinking is changing. The mandate of a central bank must not only be price stability. The mandate of central bank must be seen as part of larger mandate which includes price stability, growth and maximising employment,' he said.

Chidambaram's statement comes on the eve of Reserve Bank's first quarter monetary review in which the central bank is expected to address the several conflicting concerns including volatile exchange rate, liquidity crunch and slowing growth.

'I have tried to argue that while I acknowledge that the central banks mandate is price stability, price stability must be seen as part of larger mandate of growth and employment,' said Chidambaram while speaking at a function here.Admitting that governments and central banks
the world over have not been on the same page, he  said, ‘In fact, this antagonism between central bank and government is a  very functional antagonism, a healthy antagonism. I  am not saying it is unhealthy, it is perhaps healthy’.

The Reserve Bank of India has been maintaining a tight monetary stance overlooking the pressure from the government as well as the industry for a steep cut in interest rate to promote sagging growth.  Admitting that in the past, government did not clear projects expeditiously, Chidambaram asked industry to come forward and invest.

'I agree we are at fault. We did not clear projects quickly. A large number of bottlenecks came up, but since the last year, I have candidly said we must get over these bottlenecks...,' he said.

The Finance Minister said the Cabinet Committee on Investment (CCI) and a 24X7 project monitoring group (PMG) have been set up to get the stalled projects off the ground. He said while the project monitoring group has cleared projects worth Rs 63,000 crore, the Cabinet Committee on Investment cleared Rs 1.6 lakh crore worth of projects.
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