Ahead of second quarter monetary policy review, Reserve Bank Governor Raghuram Rajan today met Finance Minister P. Chidambaram and discussed the macroeconomic situation.
“I discussed a whole set of issues with the Finance Minister including the state of economy,” Rajan told reporters after the meeting here.
Rajan, who was Chief Economic Advisor in the Finance Ministry before taking over as RBI Governor on September 4, is scheduled to announce the second quarter monetary policy review on October 29.
High inflation offers Rajan limited scope to cut the key rates as demanded by industry to spur growth.
Rising food prices, especially that of onion and other vegetables, pushed up September inflation to a 7-month high of 6.46 per cent.
The Wholesale Price Index (WPI) based inflation rose for the fourth month in a row. It was 6.1 per cent in August and 5.85 per cent (revised upward from 5.79 per cent) in July. In September last year, it was 8.07 per cent.
The sharpest increase was in onion prices which jumped 322.94 per cent in September over the same month last year.
Repo rate hike
In its last policy review on September 20, a hawkish RBI raised the policy rate by 0.25 per cent as it kept its focus on controlling inflation. It had raised the repo rate or the short-term lending rate by 25 basis points to 7.5 per cent from 7.25 per cent.
At the same time, the central bank is faced with the issue of moderation in growth.
“The Government measures on economy are showing results and the Government will continue to take measures,” Economic Affairs Secretary Arvind Mayaram said here.
Earlier this month, the World Bank had slashed India’s economic growth forecast for the current financial year to 4.7 per cent from an earlier projection of 6.1 per cent.
The International Monetary Fund (IMF), in its World Economic Outlook, projected an average growth rate of about 3.75 per cent in 2013-14, which is expected to pick up to 5.1 per cent next year.