Finance minister Pranab Mukherjee today said inflation was not a pressing area of concern yet and asserted that fiscal stimulus will continue allowing its impact to fully run through the economy. He further said that the government cannot afford to drop its guard as the growth of core industries remained moderate at 4 per cent in September and uncertainties related to the revival of the global economy persist.

Addressing the Economic Editors’ Conference, Mukherjee said, “The first challenge is to take the economy back to the high GDP growth of 8.5-9 per cent a year and even beyond, at the earliest, and to ensure that it can be sustained for the next few decades.” The other two challenges before the government were to improve governance and broaden the agenda for inclusive development, he said.

In its second quarter review of the monetary policy, the RBI clearly signaled an exit from the easy monetary policy stance and hiked the statutory liquidity ratio (the portion of deposit banks are supposed invest in government securities) from 24 per cent to 25 per cent, hiked banks’ provisioning coverage for net non-performing assets to 70 per cent besides making loans more expensive for the commercial real estate sector. For the RBI, inflationary expectations had become a bigger concern than growth.

Mukherjee also expressed concern over the decline in non-farm credit off take and asked banks to correct the situation. “All our effort is being made to ensure that credit off-take to the employment generating sectors, especially agriculture and micro and small enterprises picks up,” he said. Non-food credit offtake has dropped to 12 per cent in October compared with 29 per cent last October. The RBI has actually pared the credit offtake target for banks this fiscal to 18 per cent from 20 per cent.

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