The Finance Minister feels that growth prospects for the current financial year would be impacted by the global economic slowdown—and the tight monetary policy followed by the RBI has also impacted growth during the current fiscal
New Delhi: Finance Minister Pranab Mukherjee on Wednesday said that the global slowdown will impact India’s growth prospects, but expressed hope that inflation will start moderating from December, reports PTI.
However, he maintained that the Indian economy growing at 8%—down from 8.5%—in 2010-11, will still be a “reason for celebrations”.
Referring to the growth prospects for the current financial year, the minister said it would be impacted by the global economic slowdown. “The news that India would grow annually at 8% would be a reason for celebrations,” he said at the annual conference of Economic Editors here.
Mr Mukherjee attributed both the economic slowdown and rising inflation to global economic problems, especially the rising price of crude oil in international markets, which has remained high at around $105 a barrel.
He attributed near double-digit inflation mainly to rising global commodity prices.
“Inflation remained sticky around 9%. I expect the overall WPI inflation to decline from December and I am hopeful that we will end the fiscal with 7%,” he said.
Despite monetary measures taken by the Reserve Bank of India (RBI) since March 2010, headline inflation has remained stubbornly close to the double-digit mark. It was 9.78% in August. Moreover, Mr Mukherjee added, the tight monetary policy followed by the RBI has also impacted growth during the current fiscal. The economy recorded a growth rate of 7.7% in the first quarter (April-June 2011-12), the lowest in 18 months. In a bid to contain inflation, the RBI has raised key policy rates 12 times since March 2010.