Economy Could Grow at 7%This Fiscal: Montek

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New Delhi, : India is preparing for growth around 7 percent in the current fiscal year which ends in March and slowing inflation would give greater flexibility to the Reserve Bank of India (RBI) in monetary policy, Planning Commission deputy chairman Montek Singh Ahluwalia said on Tuesday.

"The RBI has said growth could be 7.5 to 8.0 percent. It is more likely to be shaded downwards. We are preparing for as low as 7 percent," Ahluwalia, told a conference.

"I am consistently of the view that when inflation comes down further it gives greater flexibility in monetary policy."

The deputy chairman’s portrayal of a grim outlook comes after the Reserve Bank of India (RBI) in its Quarterly Review of the Annual Policy Statement, revised the GDP growth rate down slightly to 7.5-8 percent, against the earlier estimation of 8 percent.

Governor D Subbarao, presenting his first credit policy after taking over, kept the inflation targets unchanged at 7 percent.

Target of Credit growth rate was maintained at 20 percent.

The Central Bank left the Cash Reserve Ratio, the amount of fund that banks have to keep on deposit with it, unchanged at 6.5 percent.

The RBI had earlier slashed the Repo Rate for the first time in more than four years on primarily to infuse liquidity into the market that is facing unprecedented credit crunch.

It observed that there was enough liquidity in the banking system after recent infusion.

The credit policy came after the inflation lowered to 11.07 per cent.

RBI, however, retains the option to conduct overnight repo/reverse repo under Liquidity Adjustment Facility depending on market conditions.

It further added that it will review proposal to introduce Credit Default Swaps at an appropriate time.


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