Pranab Mukherjee confident of economy bouncing back this fiscal

Finance minister Pranab Mukherjee on Tuesday exuded confidence that economic growth will gather momentum and inflation would moderate though hovering around 6-7% level for the time being. Addressing industry captains at CII's annual meet, the minister also stressed the need to be ever ready to deal with any external shocks on real time basis. "I am confident that we would progress in recovering some of our pre-crisis growth momentum in 2012-13," he said. Economy which grew at an average rate of 9% before global crisis, slowed to 6.7% in 2008-09. There was recovery in subsequent two years as the GDP expanded by 8.4% but is estimated to again slow down to 6.9% in 2011-12. The government expects the GDP growth in 2012-13 at 7.6%. On the price situation, Mukherjee said sustained high level of inflation had been a cause of worry for policy makers, but it has now started moderating.
However, he expressed concern over spike in food inflation in March and called for bridging the gap between demand and supply. "I am confident that during the current financial year, the rate of inflation would see some moderation and remain within 6-7%. Though it is high, but for the time being, perhaps, we will have to rest with it," he said Inflation, which remained high during 2010 and most of 2011 has moderated to 6.89% in March. Expressing concern over the current phase of slowdown in industrial production he said, "The slowdown can be attributed both to domestic and global factors". "Domestic factors, namely the tightening of monetary policy in order to control inflation, resulted in slowing down of investment and growth in the industrial sector," he added. RBI announces relief for borrowers EMIs for car, auto and personal loan borrowers will come down as the Reserve Bank today announced 0.5% cut in interest rates for the first time in three years to revive sagging growth, exceeding expectations. As RBI reduced short-term lending (Repo) rates to eight% from 8.5% with immediate effect, several banks led by SBI said, they would cut the lending rates. While the RBI decision came as a pleasant surprise to the borrowers, who were expecting only 0.25% reduction in the benchmark rate, depositors will earn less on savings. Unveiling the credit policy for the current fiscal, RBI governor D Subbarao said here that the decision to cut interest rate was necessitated by deceleration in growth and a drop in inflation of non-food manufactured products from 8.4% in November 2011 to 4.7% in March this year. But, he cautioned, in view of persisting upside inflation risks particularly of food items, it may not be possible to cut rates further. Moreover, if subsidies are not contained it will further reduce the policy space for monetary easing, he said. The RBI has directed the banks not to insist on a minimum balance on basic saving bank accounts, and also not to charge for prepayment of home loans. Finance Minister Pranab Mukherjee said the RBI policy would boost investment sentiment. The government will take more steps in this direction, he added. As the country was grappling with inflation, the RBI had been following tight monetary policy with high interest rates causing hardship to borrowers. In its macro-economic assessment, the RBI projected the economic growth of 7.3% for the current fiscal, higher than 6.9% for 2011-12. It expects inflation to be 6.5% by March, 2013. The industry and the stock market, welcomed the credit policy.