Washington: Finance minister Pranab Mukherjee on Wednesday said the economy will grow by around 8.5% in the current fiscal despite the conscious decision of the Reserve Bank of India (RBI) to sacrifice growth to contain inflation.
“I am still holding the projection which I had that is 8.5% plus... We shall have to wait for some time. But it would not be less than 8% plus,” he said in an interview to PTI.
The finance minister was here to participate at the ‘US-India Economic and Financial Partnership’ jointly organized by the Confederation of Indian Industry (CII) and Brookings Institute, a Washington-based think-tank.
The government and the RBI, Mukherjee said, have been trying to strike a balance between containing growth and promoting inflation.
“One need not cancel the other, but controlling inflation is essential. In a developing economy like ours, if we cannot bring inflation within a manageable limit, the hardship goes to the weaker sections of the people... they are the worst sufferers,” the minister said.
Sacrificing growth, the RBI has raised key policy rates ten times since March 2010, to contain inflation, which is hovering at around 9%. Inflation stood at 9.06% in May.
Controlled inflation is needed, Mukherjee said, adding that the “best course would be to reduce inflation to have it at the acceptable moderate level and also to have reasonable high growth rate... because if you want to have high growth which is not realistic, that would lead to inflationary pressure.”
On the other hand, he said the country cannot afford to have very low growth as it would mean less jobs and no wealth creation. “So we shall have to strike a balance and exactly we are doing that,” the minister said.
The RBI, which is slated to hold its next review of the monetary policy on 26 July, has pegged India’s GDP growth in 2011-12 at 8%, lower than the 8.5% rate recorded in the previous fiscal.