No rush to pull back on easy money policy: Montek
08 Oct 2009
Reiterating India's commitment to a liberal monetary policy in the near term, Planning Commission deputy chairman Montek Singh Ahluwalia said today that India is unlikely to withdraw 'economic stimulus' policies in a hurry.
"For the present, there's no case for doing anything other than continuing the stimulus," Ahluwalia told reporters in New Delhi. "Once we get to seven per cent growth, and if inflation becomes uncomfortable, we will need to look at these exit issues," Ahluwalia said. "It would be a mistake to think that the world economy has recovered."
"We need to make sure that we do better than our estimate of 6.3 per cent" in GDP growth in the current year, Ahluwalia said. He sees inflation hovering around 5 per cent by March.
Ahluwalia said GDP growth could be better than seven per cent in the next fiscal year. He added that the government would consider an exit from the loose money policy only when growth touches seven per cent.
On divestment of government stake in companies it owns, Ahluwalia said the government is considering individual companies for stake sales. Market conditions are good for such share offerings, he said.
The impact of the poor monsoon seems to worry independent economists more than the government. In an interview with CNBC-TV18, Ahluwalia said, "I think the 22 per cent (shortfall in annual summer rain average) does indicate that in terms of rainfall there was a lot of deficiency. But the latest estimates that we have suggest that because of a pattern of rainfall, the deficiency was largely in areas where ground water is actually quite adequate, and indeed has been replenished in the last two years because of good rain. We don't think that the impact on production would be that negative."
Ahluwalia's statements seem to be in line with the government's general monetary policy. Earlier this week, Reserve Bank of India governor Duvvuri Subbarao also said that the low-interest regime would continue. (See: Not easy to exit soft money policy: RBI chief)
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