Just a day before the RBI’s monetary policy review, Finance Minister P. Chidambaram said the current interest rates are not expected to go up further, and assured that enough credit will be available for industry.
A good monsoon, increased sowing area, and growth of SMEs are expected to increase demand for credit which will be provided to all those who need it, he told the media here on Monday.
Stressing upon inclusive growth, he appealed to the people to minimise gold imports to enable the Government to use foreign exchange reserves for development.
“India does not produce even an ounce of gold. Last fiscal, we imported 845 tonnes of gold worth $50 billion (Rs 3 lakh crore) dipping into our precious forex reserves. In April and May alone, we imported 304 tonnes and could close the year with a demand for nearly 1,800 tonnes. Where is the money to buy this?”
On the issue of sovereign bonds, Chidambaram said all options are on the table and a decision will depend on the economic situation.
Reiterating that India is expected to grow at six per cent this year and seven per cent next fiscal, he said the country continues to be the second fastest growing economy after China.
“Despite the despondency and gloom in some places, India is still alive and kicking,” he said.
Fiscal deficit is expected to be 4.9 per cent of GDP by year-end. “It is part of our efforts to control the overall deficit. We will not breach the red-line.”
The wholesale price index (WPI) has come down from nine per cent to five per cent and consumer price index (CPI) will decline only after adequate logistics infrastructure for smoother movement of goods is in place. Core inflation, he said, is now virtually zero, while retail inflation is still high.
“There is pressure on growth but we have controlled headline inflation.”
He said while he supported Jagdish Bhagwati’s stress on growth, he also supported Amartya Sen’s emphasis on compassion for the poor. “We must combine the two.”
About the current account deficit (CAD), he said the Government expected this year to fully finance the nearly $88-billion deficit, the same as last year, without impacting into forex reserves.
Asked about the recent freefall of the rupee, the Finance Minister said until the Indian currency was at Rs 57 a dollar, the situation was manageable. When the rupee slid beyond that level, it became a matter of concern and the RBI had to step in.
Referring to Gujarat’s economic growth, he said while it was well ahead of Maharashtra in some respects, in terms of infant mortality, maternal mortality and undernourishment, it lagged behind Maharashtra.