Finance minister Pranab Mukherjee seems to be more optimistic of better economic growth this fiscal than the Reserve Bank of India (RBI). While the RBI today projected a more conservative rate of growth at 6 per cent with an upward bias, Mukherjee would rather agree with the PMEAC that expects the economic growth engine to accelerate to 6.5-6.75 per cent this fiscal. “RBI always makes very hard and conservative assessment... The GDP growth I am inclined to accept (is) the figure of Prime Minister’s Economic Advisory Council, headed by C Ranagarajan, which means from 6.5 to 6.75 per cent,” he said.

Discussing the reasoning behind the growth estimates, RBI governor D Subbarao said that while the economy is showing signs of revival, the recovery is still fragile. “This (projection) assumes a modest decline in agricultural production, as the South-West monsoon rainfall this year has been the weakest since 1972 affecting both yield and acreage of agricultural crops, but a faster recovery in industrial production…Moreover, private consumption is yet to pick up,” he said.

The Reserve Bank has also raised its estimates for inflation by 150 basis points to 6.5 per cent from its earlier estimates of 5 per cent inflation made in its quarterly review meeting last July. “The situation is aggravated by the deficient monsoon rainfall and drought condition in several parts of the country. While CPI inflation is now in double digit, the WPI inflation rate remains low,” said Subbarao. This is the reason it has signalled the unwinding of the easy monetary policy stance.

... contd.