Governor Reddy meets finance minister

The Reserve Bank of India governor Y V Reddy met finance minster P Chidambaram today and briefed him on the current economic scenario.

The meeting was part of finance ministers' day long visit in Mumbai. He addressed the Bombay Chamber of Commerce and Industry at its 169th annual general meeting and a infrastructure seminar.

While the Indian central bank sources termed the meeting as a courtesy call, chamber sources said that the governor presented a brief overview of the economic and financial situation. The topics mainly dealt was the central bank's outlook on inflation, interest rate, etc.

Finance minister was particularly worried about rising prices in the manufacturing sector and is understood to have expressed his concerns on banks' lending rates.

Higher lending rates need not lead to further pressure on prices and thus on the overall economic growth, he reported to have said at the meeting.

Another important issue understood to have been discussed was making Mumbai as the regional financial centre.

While the state of Maharastra had presented its plan to the RBI for accessing various clearances from the central bank on the foreign exchange issues, the matter is currently under discussion between the states and the RBI, said sources.

One of the comfort factors has been the moderating oil prices even with strikes in oil plants in France and inflation rate.

The inflation rate is further likely to moderate due to base effect of last year. Inflation increased to 5.61 per cent in the week ended May 7 from around 5 per cent in early February.