The Reserve Bank of India (RBI), on Monday, indicated that it would continue with its accommodative policy stance as managing growth and inflation poses a big challenge for the central bank.
“Managing trade-off between supporting growth and reining in inflation expectations is a complex policy challenge,” RBI said in its macro economic and monetary development report a day before the release of second quarter review of the monetary policy.
Prime Minister Manmohan Singh, on Sunday, talking to reporters in Thailand said global economy has not recovered fully and hence the time was not right for withdrawing stimulus packages provided to the industry to combat the impact of meltdown.
“Emerging inflationary pressures may also persist and escalate further on account of the fading away of the base effect, cost push pressures,” the central bank said while pointing out that its professional forecasters have lowered the economic growth rate projection for the current fiscal to 6 per cent from 6.5 per cent.
Upward forecast
The apex bank had earlier forecast 6 per cent growth rate with an upward bias. More recently, the Prime Minister Economic Council has projected 6.5 per cent expansion. Referring to the inflationary concerns, RBI pointed out that supply side constraints in a limited number of commodities, led by food, have been driving current inflation pressures in the economy.
“Anchoring inflation expectations in face of sustained high inflation in essential commodities will be a key challenge” for the monetary policy, RBI said.Despite the low wholesale price inflation at 1.2 per cent for the week ended October 10, the RBI said, inflationary pressures have started to emerge as the rate of price rise stood at 5.9 per cent over its March, 2009 levels. Also, consumer price inflation remains “stubbornly elevated” at double digits level.
The overall economic outlook for the current fiscal, RBI’s review of macro economy said, “is, therefore, a mixture of upside prospects of recovery and downside risks”.
Besides inflation, downside risks include sluggish demand, decline in corporate sales, deceleration in credit growth and contraction in exports.
On the positive side, it added oil prices have stablised in the global markets. Besides, RBI said, “adequate buffer stocks of foodgrains and the prospects of better rabi crops... could partly offset the adverse impact of deficient kharif”.
The upside prospects, it said also includes the impact of supportive fiscal-monetary policy stance, recovery in industrial production, significant upturn in overall business confidence, return of capital inflows and strong recovery in stock markets. In order to boost the economic growth, the RBI has since September last year made available additional liquidity of about Rs 2 lakh crore to help the cash starved industry.
Direct tax kitty up 3.7 per cent
Direct tax collections up to September registered a growth of 3.7 per cent over the same period of last fiscal year, the Reserve Bank of India (RBI) said, reports PTI from Mumbai.
While corporate tax collections grew by 5.6 per cent, collections under personal income tax (including security transaction tax) increased by 0.38 oper cent, the Reserve Bank of India said in its Macroeconomic and Monetary Developments Second Quarter Review 2009-10, released here on Monday. Advance tax collections were also reported to have been higher during Q2 FY 10, than the preceding quarter of the year, the Reserve Bank of India said.
