Economists seek rate hike, India Inc says no

New Delhi, Nov. 30: Economists termed the high economic growth rate of 7.9 per cent during the second quarter as “above expectation” and said the Reserve Bank would now focus more to tame inflation.

“This (7.9 per cent) has turned out to be much more positive than one has expected. The RBI’s monetary policy would now be more focused on inflation,” the Prime Minister’s Economic Advisory Council chairman, Mr C. Rangarajan, said.

He further said that the council’s overall growth projection of 6.5 per cent for the current fiscal may have to be revised upwards.

Beating every prediction, the economy grew by a significant 7.9 per cent in the second quarter, up from 6.1 per cent in the previous quarter, essentially due to a good showing by the industry and the services sector.
The rating agency Crisil principal economist, Mr D.K. Joshi, said there is a strong possibility of interest rate hike by the RBI in January. Inflation should now occupy more weight for the government.

India Inc, however, advocated for the continuation of monetary and fiscal policies to keep the momentum going.

Food inflation has crossed 15 per cent in the second week of November while overall wholesale price inflation stood at 1.34 per cent in October.

“The latest quarterly GDP figure showing 7.9 per cent growth for Q2 are a further confirmation of the Indian economy recovering. It is therefore important that we do not do anything to disrupt this process of recovery,” the Ficci president, Mr Harshpati Singhania, said.

Similarly, the CII director-general, Mr Chandrajit Banerjee, said the RBI should maintain policy rates at the current levels in order to prevent the growth momentum from slackening.