Monitor price situation, PMEAC tells Central Bank

“The ongoing rise in prices of food items is worrisome. RBI should keep a close watch on price situation before taking a decision on restraining the level of liquidity in the economy,” he said while inaugurating International Chamber of Commerce (ICC) Regional CEO Forum meeting being held here.

While pointing out that high level of fiscal deficit at 6.8 per cent of the GDP as targeted in 2009-10 is unsustainable, he proposed that there should be no premature withdrawal of the of the accommodative monetary and fiscal policies being pursued by the RBI and the government. “I do expect that some efforts would be made in fiscal 2010-11 to reduce the fiscal deficit,” Rangarajan said. “It is possible that in the next fiscal, the government might want to bring down the budgeted fiscal deficit and go for fiscal consolidation. Some expenditure could be withdrawn and some revision of excise duties and service tax cannot be ruled out,” he said.

Positive on growth
Talking about prospect of country’s economic growth rate Rangarajan said the “strong” growth witnessed during the second quarter of this fiscal gave rise to the hope that 2009-10 would close with a GDP growth of 7 per cent plus.
“If this trend continues, India could well clock a growth rate of 7-8 per cent in 2010-11. To get back to a higher growth trajectory of 9 per cent, would depend upon the turnaround in the world economy, as the global slowdown had impacted India’s exports and capital inflows,” the noted economist noted.

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