Mukherjee welcomes RBI’s monetary policy for 2010-11

NEW DELHI - Finance Minister Pranab Mukherjee welcomed the Monetary Policy for 2010-11 that was announced by the Reserve Bank of India (RBI) on Tuesday.

“Earlier today, the Governor of the RBI announced a set of new monetary policy measures. The well-balanced measures, which involve raising the repo rate, the reverse repo rate and the CCR by 25 basis points each, reflect a mature and balanced view of the needs of our economy, and I, fully endorse the measures, Mukherjee said.

“They complement well the policies of the Ministry of Finance aimed at controlling inflation and promoting sustainable growth,” he added.

He further said that these policies should have a gentle impact in tightening money in the economy and should dampen further inflationary pressures.

“The RBI has made a forecast of inflation of 5.5 per cent for the year 2010-11. Long-run inflation is very difficult to predict and is based on some statistical analysis but also on intuition,” he added.

Mukherjee said his own belief based on analysis done in his ministry is that inflation is now on a downward trajectory and in 2010-11 will be less than 5.5 per cent and, in fact, closer to four per cent with an upward bias.

“Inflation is extremely sensitive to the weather condition and how that affects agriculture and agricultural expectations. If nothing untoward happens on the weather front, my belief is that overall inflation has peaked and should be on a downward trajectory from now on,” he added.

“Some observers may worry that tightening of credit can dampen growth especially in the durable goods sector. But our analysis of industrial growth and credit off-take suggests that there is no reason for such apprehension, he said. (ANI)