Tight money hurts: Pranab

Ahead of the Reserve Bank’s credit policy review later this month, finance minister Pranab Mukherjee on Wednesday did not hide his disappointment over sluggish economic growth, blaming it on the tight monetary policy and an uncertain global environment.

Though he did not directly say growth would fall below eight per cent for the year, he referred to “most observers” pegging economic expansion at that rate.

He, however, called for an analysis of the number in the global context, as all major economies were witnessing low growth — the US grew 1.6 per cent in the first quarter and the European Union 1.7 per cent.

Addressing the annual Economic Editors’ Conference, Mukherjee admitted meeting the Budget target to rein in the fiscal deficit at 4.6 per cent of GDP would be a great challenge due to high crude prices. He still exuded confidence the target would be met. Already, till August, the fiscal deficit stood at 66 per cent of the target for the entire fiscal.

When asked if the RBI should pause monetary tightening, Mukherjee said, “I have the opportunity of discussing with the governor before he announces the rates. So, it would not be proper on my part to make any comment.”

He refused to buy the “so-called popular perception” the government was suffering from a policy paralysis, citing a number of initiatives such as the draft telecom policy, the proposed manufacturing policy, the proposed mining Bill, the land acquisition Bill, and finalisation of the infrastructure debt fund guidelines.