The Hindu Business Line : `RBI policy statement in line with Govt's thinking'

` have repeatedly said that exchange rate is market determined. As long as the two-way movements are orderly, the Government does not take a view on exchange rate'

New Delhi April 24 The Union Finance Minister, Mr P. Chidambaram, on Tuesday expressed confidence that the steps announced in the Reserve Bank of India's (RBI) Annual Policy statement for 2007-08 would moderate inflation without affecting growth.

Stating that the policy announcements were "broadly in line" with Government's thinking, Mr Chidambaram, however, felt that the Central Bank has taken a "cautious and conservative" position on growth projection for the economy for 2007-08.

Aggressive Target

The RBI has pegged the Gross Domestic Product (GDP) growth projection for 2007-08 at around 8.5 per cent. "If services sector continues to record double digit growth rate and if manufacture sector also record double digit growth rate, then the 8.5 per cent may turn out to be a floor and not a ceiling," Mr Chidambaram told prespersons at North Block soon after the Annual Policy announcement.

On inflation, the Finance Minister felt that the RBI's medium-term goal of reining in inflation below 4.5 per cent was an "aggressive target".

"To keep inflation below 4.5 per cent is indeed an aggressive target. That appears to be the tolerant level for inflation. If RBI is aiming at a inflation below 4.5 per cent, certainly the Government would welcome that stance and support that stance," Mr Chidambaram said.

Exchange Rate

Asked about the outlook on rupee and whether he favours rupee to be in the 41-plus level against the US dollar, Mr Chidambaram said that the Government has no view on the exchange rate. "I have repeatedly said that exchange rate is market determined. As long as the two-way movements are orderly, the Government does not take a view on exchange rate," he said.

On the RBI's decision to reduce risk weight on certain residential housing loans, Mr Chidambaram said that this was a good and positive response from the Central Bank to the appeal made by the Chief Executives of Public Sector banks last week. "Most small borrowers (those who had taken loan of Rs 8-10 lakh) would get relief," he said.

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