Will further tightening of the monetary policy affect industrial growth and hurt revenue collections?If inflation continues to remain at an uncomfortably high level,tighter monetary policy is needed to pull it in. This will help contain inflation and containment of inflation is an important factor in contributing to a sustained rate of growth in the economy,which in turn will lead to higher revenues. The EAC has projected fiscal deficit to be lower than the Budgeted 5.5 per cent in 2010-11. How will that be possible given the higher subsidy bill for both fuel and fertilisers?The reason behind our forecast is that the revenues have been very buoyant both tax and non tax revenues have increased quite substantially. Therefore this will give considerable leeway to the government in perhaps meeting the deficits of the petroleum sector and also meeting the fiscal deficit lower than 5.5 per cent. The report has expressed concerns over the decline in foreign direct investment in recent months. Do you expect this trend to continue?We estimate 9 per cent growth in 2011-12. The medium-term growth prospects are also good and therefore foreign direct investment should be forthcoming. But there are ups and downs which are due not only because of factors operating in India but also external factors like whats happening in the Middle East and developed countries. But on the whole,I think foreign direct investment will start increasing in the next fiscal.
