Pranab Mukherjee expects RBI to adjust interest rates
MUMBAI: Finance Minister Pranab Mukherjee signalled that monetary policy has to adjust to accommodate growth and not stick to inflation because the rise in food prices could not be contained by increasing interest rates, or keeping it high.
Mukherjee, the presidential candidate of the ruling coalition, said India cannot ignore the warning from rating company Standard & Poor's about a possible deterioration in the overall macro economy due to widening twin deficits, fiscal and current account.
"Food inflation can't be solved by tightening monetary policy rates,'' said Mukherjee. "Food inflation needs to be tackled by improving supply measures and not raising rates. I am confident RBI will adjust monetary policy as we are adjusting fiscal policy.''
Wholesale prices rose 7.6% in May, above analysts' expectations, which makes an interest rate cut by the central bank a difficult one. But the so called inflation in manufactured products that the central bank factors in is below 5% which it is comfortable with.
But the growth rate falling to a nine -year low may lead to a cut. The nation has to address the many problems that has led to international investors turning their backs on India leading to a sharp slump in the currency.
http://economictimes.indiatimes.com...djust-interest-rates/articleshow/14187800.cms