FM opposes tight monetary policy to check rising prices

Finance minister Pranab Mukherjee today said he does not favour a hike in lending rates at this stage to tame inflationary...

Finance minister Pranab Mukherjee today said he does not favour a hike in lending rates at this stage to tame inflationary pressures as doing so would hurt economic growth. At this point of time,I cannot accept a dear money policy or credit curbs as it will have an adverse impact on growth, Mukherjee told reporters. His remarks echoed RBI governor D Subbaraos comments a few days back that the RBI would not exit from stimulus measures unless sure of a sustained economic recovery.

The finance minister was here to participate in a Confederation of Indian Industry discussion on the proposed Direct Tax Code and to attend a meeting of the council of the Indian Statistical Institute.

Savings from economy class air travel and other austerity measures by government functionaries were only a drop in the ocean compared to what could accrue from a 10 per cent reduction in non-plan expenditure,he said. There is substantial scope for austerity if all departments reduce non-plan expenditure by around 10 per cent,he said. Mukherjee however refused to be drawn into a discussion on whether austerity had been turned into a joke by the comments of the minister of state for external affairs Shashi Tharoor. You can comment what you want but I dont have that freedom, he said. The finance minister said the government had made requests against diluting the security of functionaries with high security through the austerity moves.

Mukherjee said the government was committed to continuing with the stimulus measures until a full economic recovery happened in the US and the UK as per a commitment made by the finance ministers of G-20 countries recently. We have to wait and watch. We are watching the situation carefully, he said while pointing out that the third and fourth financial quarters would be important.

At the CII discussion,Mukherjee sought to assuage fears of double taxation,flight of capital and other concerns on account of the Direct Tax Code.

India has an unblemished record of fulfilling international commitments. Foreign investors need not fear, he said. India is going to be an investment destination. We have seen FDI increase even in the worst global recession, the finance minister said. agencies