Willing to take calibrated risks to bring the economy back on track, Finance Minister P Chidambaram on Monday said the government will work alongside the Reserve Bank of India (RBI) to rein in inflation in the medium-term and bring down interest rates to stimulate investment climate across sectors.
In his first interaction with the media after taking over as the country’s finance minister (for a second time) Chidambaram said, “Fiscal and monetary policies must point to the same direction to moderate inflation. The government will work with the RBI to ensure that inflation is moderated in the medium term.”
Emphasising the urgent need for price stability, Chidambaram said, “The government will use its food grain stocks to moderate prices and enhance import of essential commodities.”
Chidambaram said, “High interest rates inhibit investors and are a burden on every class of borrowers be it a manufacturer or a purchaser of home or two-wheeler or a student who takes an education loan.”
In June, inflation based on Wholesale Price Index stood at 7.25% while the consumer price index-based retail inflation was in double-digit at 10.02%. Industrial production recorded a dismal growth of 2.4% in May and the overall economic growth slowed to nine-year low of 6.5% in 2011-12.
The Finance Minister who met RBI Governor D Subbarao, on Monday to discuss the macro-economic situation said, “Sometimes it is necessary to take carefully calibrated risks in order to stimulate investment and to ease the burden on consumers. We will take appropriate steps in this regard.”
The RBI chief further said, “Will meet the minister again for a detailed discussion... I did not discuss specific policy action.”