Admitting that the Reserve Bank’s anti-inflation monetary measures may impact growth, the Finance Minister, Mr Pranab Mukherjee, has said the major challenge right now is to contain price rise.
“The monetary policy has been gradually tightened...
Monetary measures may end up moderating the growth if they have to be persisted for an extended period of time,” Mr Pranab Mukherjee said at an Assocham meet here today.
However, he said in the short-term, moderating aggregate demand is critical to check inflation, which is “our major challenge’’.
The RBI had yesterday hiked the key policy rates for the tenth time since March 2010 a bid to tame inflation, which crossed the 9 per cent mark in May.
Inflationary pressures persist both from higher global commodity prices and domestic structural demand-supply imbalances in several commodities.
The Minister said while inflation has implications with respect to sustaining the growth momentum, the drivers of economic expansion remain intact.
“... The growth drivers of the economy remain broadly intact,” he said, adding, “I am so far hopeful that we should be able to repeat the growth performance of 2010-11 in 2011-12 as well,” he said.
In 2010-11, the country’s GDP is estimated to have grown at the rate of 8.5 per cent.
Mr Pranab Mukherjee said as the Government gears itself up for the task of preparing the 12th Five-Year Plan (2012-17), “We need to aim at a GDP growth of 9 to 9.5 per cent for the Plan period.”
For this much expansion in GDP, the country’s economy must grow at an average rate at least one percentage point higher than the 8.2 per cent rate likely to be realised in the XII Plan.
On the financial inclusion required to promote the agenda of inclusive growth, he said it is a major challenge before the banking sector and financial system at large.
“Newer perspective and strategies towards financial inclusion are needed to reach the unbanked and the under-banked sections of our country,” he said.
While applauding the banking sector on their performance with respect to growth in deposits and net profits, Mr Pranab Mukherjee expressed concerns on their “asset quality’’.
During 2010-11, non-performing assets (both gross and net) increased from the levels witnessed in the previous year.
“It is important for the banks to constantly monitor and bring down the NPA to the previous level,” he said.
He also asked the banks to go for more innovation and come up with value-added offerings to meet the growing needs of customers.
He further said the Government was in the process of deepening policy reforms in the financial sector and addressing the gaps in the overall economic regulatory architecture.