Tight monetary policy may impact growth: Pranab

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Finance Minister Pranab Mukherjee
New Delhi, June 17: Admitting that the Reserve Bank's anti-inflation monetary measures may impact growth, Finance Minister Pranab Mukherjee today (June17) said the major challenge right now is to contain price rise.

"The monetary policy has been gradually tightened...Monetary measures may end up moderating the growth if they have to be persisted for an extended period of time," Mukherjee said at an Assocham meet here.

However, he said in the short-term, moderating aggregate demand is critical to check inflation, which is "our major challenge".

The RBI yesterday hiked key policy rates for the tenth time since March, 2010, in a bid to tame inflation, which crossed the 9 per cent mark in May.

Inflationary pressures persist both from higher global commodity prices and domestic structural demand-supply imbalances in several commodities.

Mukherjee said while inflation has implications with respect to sustaining the growth momentum, the drivers of economic expansion remain intact.

"... The growth drivers of the economy remain broadly intact," he said, adding, "I am so far hopeful that we should be able to repeat the growth performance of 2010-11 in 2011-12 as well," he said.

In 2010-11, the country's GDP is estimated to have grown at the rate of 8.5 per cent. 

PTI

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