Ahead of second quarter monetary policy review, Reserve Bank Governor Raghuram Rajan today met Finance Minister P Chidambaram and discussed macroeconomic situation.
"I discussed whole set of issues with the Finance Minister including state of economy," Rajan told reporters after the meeting here. Rajan, who was Chief Economic Advisor in the Finance Ministry before taking over as RBI Governor on September 4, is scheduled to announce the second-quarter monetary policy review on October 29. Also read: Why Raghuram Rajan has to deliver a kick in UPA's pants High inflation offers Rajan limited scope to cut key rates as demanded by industry to spur growth. Rising food prices, especially of onion and other vegetables, pushed up September inflation to 7-month high of 6.46 per cent.The Wholesale Price Index (WPI) based inflation rose for the fourth month in a row. Inflation was 6.1 percent in August and 5.85 percent (revised upward from 5.79 per cent) in July. In September last year, it was 8.07 per cent.
The sharpest increase was in onion prices which jumped by 322.94 percent in September, over the same month last year. In its last policy review on September 20, a hawkish RBI raised the policy rate by 0.25 percent as it kept its focus on controlling inflation. The repo rate or the short term lending rate has been increased by 25 basis points to 7.5 percent from 7.25 percent. At the same time, the central bank is faced with the issue of moderation in growth. "The government measures on economy are showing results and government will continue to take measures," Economic Affairs Secretary Arvind Mayaram said here. Earlier this month, the World Bank slashed India's economic growth forecast for the current financial year to 4.7 percent from an earlier projection of 6.1 per cent. International Monetary Fund (IMF), in its World Economic Outlook, projected an average growth rate of about 3.75 percent for India in 2013-14, which is expected to pick up to 5.1 percent next year.
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