Inflation biggest challenge to growth momentum in the short term: FM
Pranab Mukherjee said RBI's policy has been tightened and measures may have moderating effect on growth if kept in place for an extended period of time.
By ET Bureau | Updated:
NEW DELHI: The immediate challenge before the government is to control inflation and the monetary policy being pursued to tame it may impact growth, the finance minister said on Friday.
“Our major challenge in the short-term is inflation, which has implications on sustaining our growth momentum,” Pranab Mukherjee said at a meeting of the industry lobby group Associated Chambers of Commerce and Industry of India (Assocham).
Mukherjee said the RBI’s monetary policy has been tightened and measures may have a moderating effect on growth if kept in place for an extended period of time. He was optimistic that India could sustain high economic growth in the coming years. “The growth drivers of the economy remain broadly intact,” Mukherjee said. “We should be able to repeat the growth performance of 2010-11 in 2011-12 as well.”
The RBI on Thursday raised key policy rates for the tenth time since March 2010 and said it would continue its battle against inflation, which crossed the 9% mark last month. The country’s gross domestic production (GDP) is estimated to have grown at 8.5% in 2010-11. “We need to aim at a GDP growth of 9 to 9.5% for the 12th Five Year Plan,” he said.
Mukherjee said the government would deepen policy reforms in the financial sector and address gaps in the overall economic regulatory architecture.
“Major steps are being taken to simplify and place the administrative procedures concerning taxation, trade and traffic and social transfers on electronic interface, free of discretion and bureaucratic delays,” he said.
The finance minister said consolidation of banking services, meeting capital adequacy requirements and effectively managing human resource were some key areas of concern for domestic banks. He expressed concern over the issue of asset quality in banks and said it was important for them to constantly monitor and bring down non-performing assets.
“Indian banks need to adopt the best risk management practices to keep themselves abreast with global developments,” Mukherjee said, adding that newer perspectives and strategies towards financial inclusion were needed to reach the un-banked and under-banked sections of society.
“Our major challenge in the short-term is inflation, which has implications on sustaining our growth momentum,” Pranab Mukherjee said at a meeting of the industry lobby group Associated Chambers of Commerce and Industry of India (Assocham).
Mukherjee said the RBI’s monetary policy has been tightened and measures may have a moderating effect on growth if kept in place for an extended period of time. He was optimistic that India could sustain high economic growth in the coming years. “The growth drivers of the economy remain broadly intact,” Mukherjee said. “We should be able to repeat the growth performance of 2010-11 in 2011-12 as well.”
The RBI on Thursday raised key policy rates for the tenth time since March 2010 and said it would continue its battle against inflation, which crossed the 9% mark last month. The country’s gross domestic production (GDP) is estimated to have grown at 8.5% in 2010-11. “We need to aim at a GDP growth of 9 to 9.5% for the 12th Five Year Plan,” he said.
Mukherjee said the government would deepen policy reforms in the financial sector and address gaps in the overall economic regulatory architecture.
“Major steps are being taken to simplify and place the administrative procedures concerning taxation, trade and traffic and social transfers on electronic interface, free of discretion and bureaucratic delays,” he said.
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The finance minister said consolidation of banking services, meeting capital adequacy requirements and effectively managing human resource were some key areas of concern for domestic banks. He expressed concern over the issue of asset quality in banks and said it was important for them to constantly monitor and bring down non-performing assets.
“Indian banks need to adopt the best risk management practices to keep themselves abreast with global developments,” Mukherjee said, adding that newer perspectives and strategies towards financial inclusion were needed to reach the un-banked and under-banked sections of society.
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