Prime Minister Manmohan Singh has called a meeting on Saturday to discuss policy options with regard to slowing economic growth and high inflation.
“The meeting (with PM) is on the current economic situation. We will have a discussion on growth and inflation, and consider the policy options in this regard,” Prime Minister’s Economic Advisory Council (PMEAC) chairman C Rangarajan said.
Persistently high inflation has forced the Reserve Bank of India (RBI) to increase the key policy rates 12 times since March, 2010.
Headline inflation remained close to the double-digit mark at 9.72% in September as food products, fuel and manufactured goods grew costlier, a development that is likely to prompt RBI to continue with its policy of monetary tightening.
Food inflation stood at 9.32% for the week ended October 1, as prices of major kitchen staples continued to pinch consumers’ pockets.
India’s economy grew by 7.7% in the first quarter, the slowest growth in 18 months, against 8.8% in the same period in the previous fiscal.
Industrial output also remained subdued for the second consecutive month in August, registering a growth of just 4.1%.
finance minister Pranab Mukherjee today in Paris said Indian economy is likely to grow by 8-8.2% this fiscal.
Reserve Bank of India has to do sober thinking, see the reality, instead of banking on theorizing in tandem with the Planning Commission. The problem is, both these organization has no grip over the Indian economy. Consistent Interest rate increase is like locking the stable after the horse is lost. It is a pity, wisdom has not dawned on these economists after committing the nation to 12 increases in the interest rates in the last 18 months, with no rewarding results. Headline inflation is 9.72%, food inflation @ 9.42%. Yet, the central bank is talking of Policy of monetary tightening. It is already tight. There is no space for further tightening. Government is unduly concerned about growth. If prices are brought down, inflation is low, PPP is steady, people will be happy. Higher growth rate will only bloster the pride of the Government. Populist schemes, see atleast 40% dilution thanks to maverick middle men who knock down a considerable portion. This high price corruption has made a glaring imprint on liquidity. Supply side constraints, indiscriminate import on tariff rates which are unscentific, inconsistent export policy to fill coffers of a few, have taken the wind out of the sales of government expenditure. But the bickerings, hidden wealth, call it black money or gratification, controls 40% of the economy. Has the Finance Minister any guts to repair the derbies and initiate a new order without fear or favour?