Amidst hectic lobbying for a rate cut to revive growth prospects in the RBIs policy review on Tuesday,the countrys chief statistician TCA Anant points out that RBIs main responsibility is to ensure structural integrity of the financial system and not look at growth concerns. In a conversation with Surabhi,he says that while there is slowdown,the economy is still growing but peoples perception of growth has changed. Excerpts:
Rating agencies have raised doubts over Indias growth story. What is your view on the economic slowdown?
There is no denying that growth has slowed down but in the larger context,the slowdown is not out of line with what is happening elsewhere. In absolute terms,people are not worse off because economy is still growing and standards of living are improving. But there is a feeling that we should be doing better. Our growth figures in terms of quinquennial average have been rising over time. So we need to keep a sense of balance.
What do you have to say about RBIs decision to hold rates despite lowering growth?
The Reserve Bank of India has a very difficult job. They have to take a call on what is the appropriate monetary policy. Their principal responsibility is to the structural integrity of the financial system and that call is not necessarily the same as someone whose main concern is growth. So that tension always exists and it is healthy for an economy.
What is your expectation on the inflationary front?
At the moment,wholesale price index-based inflation is at around 7 per cent while consumer prince index-based inflation is at about 10 per cent. CPI inflation has been fairly high for a while and my sense is that it is largely structural. WPI inflation has a greater chance of softening because international prices of crude have been softening and intermediaries are softening. Countering that,the rupee has been rising and monsoon rains are deficient. But I am less sure of a softening in WPI by end of the year as most of it is structural and is being driven by some of the policy initiatives,such as NREGA that have driven up demand. What happens to inflation is then a supply side phenomenon.
What are your comments on IIP data volatility?
Volatility is a characteristic of certain types of statistical measures. I can give you a measure which has zero volatility and is completely meaningless. Also,a part of the volatility is related to problems in data collection. A Planning Commission committee is now working on these issues as well,and will revise the base year for the IIP.