New Delhi: Endorsing the Reserve Bank’s monetary policy stance, Finance Minister P Chidambaram on Tuesday said he will discuss with the RBI Governor what further measures could be taken to contain capital flows.
“RBI governor will, I am sure, visit Delhi shortly and we will discuss what further policy actions need to be taken (to contain capital flows),” he told reporters, when asked about RBI Governor Y V Reddy’s views that appropriate and decisive policy actions were required to manage capital flows consistent with macro fundamentals.
Chidambaram said: “We will discuss with the RBI. He (Reddy) has given only a statement.”
To a query, he told reporters that the gap between interest rates in India and the US have indeed increased due to cut announced by that country’s Federal Reserve.
However, there is no surety that capital flows would increase due to the US central bank’s move, he said.
On apprehension of surge in capital flows due to widening of interest rate differential between India and the US, the finance minister said: “We do not what will happen yet. As I had said the cat can jump either way. There could be increased capital flows... Let us wait and watch.”
There are no instant answers to these difficult questions, he said.
The central bank governor has reinforced price stability and has emphasised on credit delivery, particularly for employment oriented sectors, Chidambaram said.
Chidambaram said: “He (RBI governor) has also resolved to monitor heightened global uncertainties and respond swiftly. That approach, I think, is the correct approach to take when there are uncertainties in the international market.
“The policy should be interpreted where the RBI has preserved itself the flexibility to move either way depending upon the emerging situation,” he said.
On GDP growth projection of 8.5 per cent by the RBI for the current fiscal, he said: “These are projections by RBI. There are also projections by the Economic Division and Economic Advisory Council of Prime Minister as well.”
To a query on RBI’s Industrial Outlook Survey indicating some moderation in the business confidence, the finance minister said there is no reason to believe that there is a slow down in India’s economic growth.
He said non-food credit growth has indeed decelerated, but that was the purpose of RBI’s previous policies. However, growth in money supply and aggregate deposits of scheduled commercial banks still continue to be high.