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2011-04-29

RBI governor meets FM for policy review

Policymakers are worried over persistent high inflation, which could again force the central bank to hike rates -- something it has done eight times in the past 15 months.

Reserve Bank of India Governor D. Subbarao met Finance Minister Pranab Mukherjee today ahead of a review of the monetary policy next week,

"As a standard practice I had come to review the macro economic situation with finance minister and senior officers ahead of the policy review," Subbarao told reporters after meeting the finance minister.

The policy review is scheduled for May 3.

Policymakers are worried over persistent high inflation, which could again force the central bank to hike rates -- something it has done eight times in the past 15 months.

"Fundamentals as in a strong deposit growth and first half of fiscal being a lean credit growth pressure may not warrant a steep hike," said Rajesh Iyer, head products and research, Kotak Wealth Management.

"But having said that the latest inflation number that came out on April 25 was higher than RBI estimates. RBI may still be ok to go ahead with the same as between inflation and growth the latter is yet to see any slowdown. Inflation surely remains sticky," added Iyer.

Asked about high levels of inflation affecting growth, the central bank governor said, "We will answer these questions on May 3."

Though the government estimates India's gross domestic product to rise by 9 percent in the current fiscal, the Confederation of Indian Industry (CII) said it expected growth to be more in the range of 8-8.5 percent.

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