RBI Governor says the central bank has always maintained the growth-inflation balance; Finance Secretary Arvind Mayaram briefs Jaitley on CAD
New Delhi : Reserve Bank of India Governor Raghuram Rajan today said the central bank and the government were “absolutely” engaged in curbing inflation.
“It’s absolutely a task that the government and the RBI are engaged with,” Rajan told reporters after meeting newly-appointed Finance Minister Arun Jaitley. The meeting, which comes just days before the next bi-monthly monetary policy review on June 3, lasted for about 50 minutes.
The RBI is aiming to bring down Consumer Price Index inflation rate to 8% by January 2015 and to 6% by January 2016, as suggested by the Urjit Patel committee on monetary policy framework.
In April, India’s annual inflation rate based on the new CPI rose to a three-month high of 8.59%. Inflation rate based on the Wholesale Price Index, however, fell to 5.20% in April from 5.70% in the previous month.
There have been media reports suggesting that Rajan may not be retained if the Bharatiya Janata Party comes to power at the Centre. Rajan said the central bank has maintained the growth-inflation balance. “RBI has always maintained the balance between growth and inflation. Of course (we continue to do so),” Rajan said. While growth has been slackening persistently, inflation hasn’t shown sharp signs of easing.
In its advance estimate for 2013-14, the Central Statistics Office had projected India’s economic growth at 4.9% compared with a decade’s low of 4.5% in 2012-13. If growth is along CSO’s estimates later this month, it would be the second consecutive year with sub-5% growth.
On the steep fall in India’s current account deficit in Jan-Mar and 2013-14, Rajan said it was a “healthy” number. India’s current account deficit narrowed to $1.2 bln, or 0.2% of its gross domestic product, in Jan-Mar from $18.1 bln or 3.6% of GDP in the corresponding period a year ago. For 2013-14 (Apr-Mar), India’s current account deficit stood at $32.4 bln or 1.7% of the GDP, sharply lower than the year ago figures of $87.8 bln or 4.7% of GDP.
Asked about a possible relaxation of gold import restrictions, Rajan said: “You will see policies as they are rolled out.”
Meanwhile, Finance Secretary Arvind Mayaram said he has broadly discussed the current account deficit situation with the Finance Minister Arun Jaitley.
“Very broadly but finer points (on CAD) will happen in the presentation,” Mayaram told reporters.
Mayaram said although the current account deficit situation is comfortable at present, the government has to be watchful. “It’s comfortable but we will have to be watchful because global markets are still volatile. So we have to be very watchful on current account deficit and we will have to continue to keep a very close watch,” he said. On relaxing gold import curbs, Mayaram said, “We have to be very careful and watchful.”