RBI governor holds briefing meeting with PM

13 June 2009

Reserve Bank Governor D Subbarao prime minister Manmohan Singh ahead of the Union Budget to brief the PM on the impact of the various measures and initiatives taken by the central bank to shield the Indian economy from the impact of the global financial meltdown.

The PM's meeting with the RBI governor comes ahead of the budget for 2009-10 likely to be table before the parliament in the first week of July and is therefore seen to be significant.

States have demanded that the centre should share 50 per cent of the burden arising from implementation of the Sixth Pay Commission recommendations. Additionally they have also asked that the fiscal deficit ceiling be relaxed to enable them to borrow more without running the risk of being penalised. The RBI manages the borrowing programme of states.

With record-low inflation levels, India Inc is looking for cuts in key policy rates by RBI to boost economic demand and according to some economists policy rates by the central bank will probably not be hiked till the third quarter of 2009-10 due to absence of strong domestic fundamental support.

According to analysts a gradual withdrawal of the quantitative easing cycle in response to improving economic indicators was expected, but economic growth was still at a very nascent stage for the RBI to initiate any reversal in its interest rate stance.

Singh had a separate meeting with home minister P Chidambaram and Planning Commission deputy chairman Montek Singh Ahluwalia and finance minister Pranab Mukherjee who is expected to present the budget on 3 July.