Monetary and fiscal policies have to move in tandem: Khan
Terming fiscal deficit as "one of the major concerns", RBI Deputy Governor H R Khan Tuesday said the monetary and fiscal policy have to move in tandem.
New Delhi: Terming fiscal deficit as "one of the major concerns", RBI Deputy Governor H R Khan Tuesday said the monetary and fiscal policy have to move in tandem.
The government in the last couple of months has taken several reform measures such as liberalising FDI norms for aviation and multi-brand retail to boost investment climate and economic growth.
It has also reduced the subsidy outgo on diesel and LPG.
Following a slew of fiscal measures by the government, industry has started pressing for a rate cut by the Reserve Bank to encourage investment.
Even Finance Minister P Chidambaram last week had said "rates must come down and if the fiscal policy steps that we are taking encourage the central bank to take monetary policy action which will result in lower interest rates, I think that will be good".
The RBI is scheduled to unveil its second quarter review of the credit policy on October 30 amidst hopes of cut in the benchmark interest rate.
"As we have articulated time and again, it (monetary policy) has to be in tandem with the fiscal policy. It has to be a joint venture. It is not a solo play," Khan said adding the fiscal deficit is one of the major concerns in the current situation.
Though the fiscal deficit target for 2012-13 has been pegged at 5.1 percent of the GDP, the government feels it may be difficult to stick to the Budget estimates.
Khan also said that supply side response is required for inflation management.
As per the latest data, inflation in September shot up to 7.81 percent from 7.55 percent in the previous month.