Economic Survey 2014: Inflation limits scope for RBI to cut rates

NEW DELHI: Stating that inflation has eased out, but is still above comfort level, the Economic Survey for 2013-14 emphasised the role of monetary policy for controlling price rise. "Monetary policy is essential for controlling inflation in long run," the survey said.

"Moderation of inflation will help ease monetary stance. Inflation limits scope for the RBI to cut rates," the survey stressed. "We need formal monetary policy rules for targeting CPI inflation," the survey added.

The survey projected the GDP growth at 5.4-5.9% for the current financial year. "Economy can look forward to better growth prospects in FY15," the survey said.

The country's GDP for the fourth quarter of the financial year 2013-2014 grew at 4.6%. The GDP for the entire FY14 grew at 4.7%. This marks a second straight year of sub-5 percent growth - the worst slowdown in more than a quarter of a century.

Prime Minister Narendra Modi-led NDA government has taken over an economy in shambles. Ailing with a decade low sub-5 per cent economic growth and above-comfort inflation, the new government is faced with the daunting task of repairing an economy without the luxury of enough revenue in its coffers.

The balancing act between fiscal prudence and stimulating growth is tough one to pull off, and all eyes are now on Finance Minister Arun Jaitley's maiden budget to provide some direction to an economy in doldrums.