FM pleased with monetary policy

The central government and the Reserve Bank of India are on the same wavelength, Union finance minister P Chidambaram said here today.

Talking to a group of reporters, he said that he was quite pleased with the monetary policy. The RBI governor has leaned in favour of growth while cautioning about certain downside risks.

"We acknowledge RBI's authority on the nature of monetary policy and we are quite pleased that there is broad convergence in the views of the government and the RBI," he added.

He said that the government would strive to achieve higher economic growth and lower inflation. RBI has put a forecast of GDP growth at 7.5-8 per cent and inflation at 5-5.5 per cent for FY07.

He said that he would aim to achieve 7.5-8 per cent GDP growth and would aim to keep the inflation below 5 per cent. The increase in risk weightage for capital markets, real estate and the hiked provisioning for personal and housing loans of over Rs 20 lakh is in my view a very important signal to the banks that most of the credit must go to the productive sectors such as agriculture and manufacturing, he said.

Referring to challenges and concerns, he said that the incomplete pass-through fuel prices were the biggest concern. "We have so far managed and we have to find ways to manage that in the future too," he said.

At the current level of international crude prices around $70 per barrel, it was no longer an economic issue and there was a need for consensus on the domestic fuel pricing.

"Nothing can be done without political consensus," he said, adding that the ministry of petroleum was taking the lead to forge a consensus on the issue.