Rajan meets FM ahead of his first policy review

Written by fe Bureau | New Delhi | Updated: Sep 18 2013, 09:17am hrs
In a run-up to his first monetary policy review on Friday, RBI Governor Raghuram Rajan met finance minister P Chidambaram on Tuesday.

The meeting comes as the US Federal Reserve is expected to take a call on winding down its bond-buying fiscal stimulus in the two-day meeting through Wednesday.

Emerging out of North Block, the building that houses the finance ministry, Rajan said he discussed a whole gamut of issues with the finance minister. Finance ministry and RBI are in constant consultations, he told reporters.

The newly appointed governor faces a tough task ahead as headline inflation in the month of August touched a six-month high. The former chief economist of IMF has already lifted the expectations of the market by announcing a slew of measures to boost the rupee on his first day in office.

While industry is demanding a cut in the policy rate to boost growth, most observers said chances are slim as headline inflation rose an annual 6.1% in August compared with 5.8% in July.

The spurt in wholesale price index (WPI) was driven by expensive food items particularly onions.

WPI inflation coupled with high food prices leaves little room for Rajan to ease RBI's monetary stance in its mid-quarter review to be unveiled on 20th of this month.

This comes as economic growth crashed to a four-year low of 4.4% in the first quarter of 2013-14.

Inflation in manufactured products further fell to 1.9% from 2.81%, despite depreciation of the rupee increasing imported inflation. This showed that demand in the Indian economy remained subdued.