Credit policy not to hamper growth: FM

Chidambaram calls rbi projection of gdp growth a 'guesstimate'

Finance Minister P Chidambaram today said the Reserve Bank of India's (RBI's) decision to reduce the repo rate by 25 basis points would not hamper investment and growth.

He added that the central bank's projections on gross domestic product (GDP) growth and inflation could only be a "guesstimate" as the impact of a poor monsoon and oil prices were unpredictable.

"In a year when monsoon is 13 per cent deficient and oil prices are at $56 a barrel and unpredictable, anything is only a guesstimate," Chidambaram said.

He, however, said the RBI's decision to scale down GDP growth projections to 6-6.5 per cent and raise the inflation forecast from 5 per cent to 6.5 per cent was "no reason to quarrel".

"With a deficient monsoon and high oil prices one will have to be extremely optimistic to hope that this will not affect growth rates and inflation. But, we have no control on the two factors," Chidambaram said.

The minister said the RBI's decision could marginally raise the cost of borrowings.

"The repo rate adjustment is a marginal one, presumably because RBI thinks there is some excess liquidity in the market," Chidambaram said, adding the government's borrowing programme would be as per schedule.

"It (the policy) is a measured and balanced response to the situation and I am happy that the RBI is in broad agreement with the government's approach that there is nothing warranted at this stage which will discourage investment or growth," he said.

Though Chidambaram refused to comment on the possibility of duty cuts on crude petroleum and petroleum products, he said, whenever required, the government would take necessary fiscal and monetary measures to check inflation.

"The government and RBI will continue to consult each other on the issue," he said, adding that inflation was supply induced.