Growth drivers of India's economy broadly remain and fiscal profligacy at this time could be disastrous, Finance Minister Pranab Mukherjee said on Friday. The statement comes in the backdrop of the recent Reserve Bank of India (RBI) rate hike. Sacrificing growth, the RBI raised the short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each to 7.50 and 6.50%, respectively. Mukherjee endorsed RBI's stance stating, "We need to have price stability for sustaining growth in the medium term." He said there is no room for further expansion in fiscal deficit now. "We have infused 3% of gross domestic product (GDP) to stimulate economy in the last three years." The RBI acknowledged that there is deceleration in some sectors, notably interest rate sensitive ones, such as automobiles. But it acknowledged that in the current circumstances, some short-run deceleration in growth may be unavoidable to bring inflation under control. Admitting inflation as a "major" concern, Mukherjee said, it will have implications on growth in medium-term. However, he added, the medium-term growth prospects of the economy remain buoyant. "The monetary steps may hurt growth if continued for some time," he said.
Moneycontrol
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