New Delhi: Pitching for easy monetary policy in the upcoming review, Finance Minister P Chidambaram Sunday said that if RBI cuts rates it will help economy to grow at a higher rate of 6.5 percent in the next fiscal.
"Well I can't direct Reserve Bank to do this or to do that. All I can say is as statement of fact -- if policy rates are reduced it will help us to get 6.5 percent growth that we have target," he told PTI in a post Budget interview.
"I am sure that monetary policy advisory committee to the Governor will take note of all that we have done, all that we have promised to do and advise him appropriately and I am sure Governor will take the decision in his best judgement," he said.
On fiscal side, Government in the last few months have taken several steps including deregulation of fuel price, allowing FDI in multi-brand retail, raising FDI cap in sectors like aviation to boost investors confidence in economy.
Besides, the government also contained fiscal deficit below the targeted level of 5.3 percent of GDP in the current fiscal.
However, growth slipped to a decade low of 4.5 percent in the third quarter of the current fiscal. As per the CSO estimates, the economy is expected to grow at 5 percent for the entire fiscal, against 6.2 percent in 2011-12 and 9.3 percent a year before that.
The latest Economic Survey released last week said Indian economy is likely grow at a rate of 6.1 to 6.7 percent in the next fiscal claiming that the downturn is more or less over and economy is looking up.
RBI is scheduled to unveil mid-quarter review of monetary policy on March 19.
Shifting its focus from inflation control to growth push-up, RBI in the last monetary policy review in January reduced the short-term interest rate by 0.25 percent after a gap of nine months.
Besides, it also injected Rs 18,000 crore liquidity through a similar reduction of Cash Reserve Ratio.
While repo rate came down to 7.75 percent from 8 percent, Cash Reserve Ratio (CRR) was reduced by similar margin to 4 percent.
Noting that tight monetary policy by Reserve Bank in the face of persistent inflationary pressures has contributed to a sharper slowdown of the economy than anticipated, the Economic Survey 2012-13 said, there is some room for further easing of the policy to perk up economic activity.
"There has been some moderation in inflation in third quarter of 2012-13 and with the expected fiscal consolidation the current macroeconomic situation creates room for a more accommodative monetary policy," it said.
Further, with a significant part of inflation getting generated because of poor supply responses, a further shift in the policy stance of RBI, coupled with improving access to credit with moderation in its cost, would be desirable, it said.
First Published: Sunday, March 3, 2013, 15:47