Niti Aayog's Lahiri flags growth risks in case of further monetary policy tightening

Kolkata: Policymakers need to balance output growth and inflationary expectations, Niti Aayog vice chairman Ashok Lahiri said on Friday in Kolkata, as bets mount on whether Wednesday’s US Federal Reserve move to pause rate hikes gives the Reserve Bank of India (RBI) much-needed breathing space in setting its own rate trajectory.

"So far, so good," Lahiri said, referring to the RBI’s decision in early October to raise the policy rate by 25 basis points to help restrain inflation.

"Just as inflation is a concern, simultaneously maintaining output and employment is important," Lahiri said, responding to ET’s query on his expectations of further monetary tightening.


To be sure, bets on further tightening increased after the RBI published the minutes of the Monetary Policy Committee (MPC) meeting earlier this month. Members indicated the likelihood of more rate hikes to curb inflation, even as they flagged risks to economic growth, especially in light of elevated crude oil prices.

Lahiri said that the overall business climate is clouded by geopolitical uncertainties and that this explains below-par private investment in India.

"The world is suffering from uncertainties. You can’t even quantify the risk. It’s better to be safe than sorry," he said.

Earlier, at a CII-organised banking colloquium in Kolkata, Lahiri urged banks to go beyond traditional lending and act as facilitators to connect businesses with financial resources and investment opportunities to unlock West Bengal’s industrial potential.

"Can banking go beyond providing credit? Technically, yes," he said, arguing that banks could act as "matchmakers" between businesses and suitable sources of finance.

Referring to West Bengal’s natural resources, he said there are compelling reasons for industry to come to the state.

On the contentious issue of land acquisition, Lahiri argued that one needs to be rational and understand that industry would look for land where all the connected infrastructure is available.

"We have to accept that people do business to make money," he said, adding, "Bengal needs a push. People should know that Bengal is open for business."