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Our Bureau

Expects Centre's fiscal deficit to be within target

BETTING ON CRUDE: The RBI Governor, Dr Y.V. Reddy, and the Chairman, Pension Fund Regulatory and Development Authority, Mr. D. Swarup, at a conference in the Capital on Thursday. — Kamal Narang

New Delhi , Sept. 21

The Reserve Bank of India on Thursday said that it would stick by its projected estimates for inflation and economic growth for the current fiscal.

"We stick to our projected estimate of 5-5.5 per cent target for inflation and 7.5-8 per cent gross domestic product growth as stated in the monetary policy," Dr Y.V. Reddy, RBI Governor, told newspersons on the sidelines of a conference on financial education organised by the Pension Fund Regulatory and Development Authority (PFRDA).

Worries remain

Although there has been a slight increase in prices of a few commodities, Dr Reddy maintained that this did not warrant the RBI to alter its estimates on inflation rate for the current fiscal.

He, however, admitted that the central bank was much concerned about inflationary expectations. He added that unless crude oil prices fell on a sustained basis, inflation worries would remain.

``Unless there is a convincing reason that oil prices are easing off on a sustained basis, the inflationary expectations will not be significantly altered. We keep observing how things pan out, but at the moment this by itself is not a cause for revising the inflation estimate," Dr Reddy said.

The RBI Governor also said that there was no one-to-one correspondence between interest rates in the US and India. This observation came a day after the Federal Reserve of the US left rates unchanged.

"We are monitoring these developments. There is no one-to-one correspondence," Dr Reddy said when asked about the Federal Reserve's rate-tightening pause for the second time.

The US Federal Reserve left its benchmark rate unchanged at 5.25 per cent on Wednesday.

In the medium term, Dr Reddy said that both the RBI and the Union Government had a common goal of keeping inflation under 5 per cent.

Annual inflation in the week ended September 2 stood at 4.78 per cent, lower than the 5.01 per cent in the previous week.

The RBI also expects the Centre's fiscal deficit for the year ended March 31, 2007, to be within the target.

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