RBI says inflation biggest enemy; FM hopeful of 8.5pc growth

Kolkata, Jul 4 (PTI) Terming as "baby steps" the hike in
lending and borrowing rates, the Reserve Bank of India on
Sunday said it would take appropriate measures to rein in
inflation, even as Finance Minister Pranab Mukherjee pinning
hopes on good rain said the economy would grow by 8.5 per cent
this fiscal.
While Mukherjee appreciated RBI's 25 basis points hike in
short-term lending and borrowing rates(repo and reverse-repo),
RBI said "inflation is the biggest enemy".
In an unscheduled move, RBI on last Friday evening raised
repo and reverse repo rates by 25 basis points to 5.5 and 4
per cent, respectively.
The Reserve Bank maintained that containing prices
remains its main priority. "For RBI inflation is everything
..., for (finance) ministry, it is growth. But in the long
run, both will converge," RBI Deputy Governor K C Chakrabarty
said on the sidelines of an Assocham event here.
Speaking at the event, the finance minister hoped the
economy would grow by 8.5 per cent this fiscal if the monsoon
is favourable and would attain double-digit growth in the next
two years.
"If the monsoon this year is favourable, then we will
get 8.5 per cent (this year) and nine per cent plus next year
and double digit growth thereafter in a sustainable manner,"
he said.
Prime Minister Manmohan Singh had also said Saturday
that the Indian economy is targeted to grow by double digits
in the 2-3 years.
During 2009-10, Indian economy grew at better than
expected rate of 7.4 per cent. The GDP expanded over 8.6 per
cent in the last quarter of the same fiscal.
However, according to the India Meteorological
Department (IMD), June rainfall was disappointing but still 60
per cent higher than in the same month a year ago. Monsoon
rains were 16 per cent below normal in June, IMD had said.
Appreciating the RBI move, Mukherjee said, "So far as
interest rate is concerned, there is 25 basis points increase
in repo and reverse repo rates... It is an appropriate,
welcome measure."
Justifying the decision to hike rate just 3 weeks before
the scheduled policy review, Chakrabarty said, "We don't
increase anything by less than 25 basis points. In that, it is
a baby step." MORE PTI DC
RBT


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