'The CRR cut signals that the cycle is about to turn'

Font Size

Print

Feedback

Email

Discuss

: very high. The RBI would have taken this step sooner or later. So why not do it at a time when it is most needed? In that sense, it does signal that the cycle is about to turn.

Have we reached a stage where slowdown in growth has emerged as a bigger concern than inflation?
A better way to answer this is to say that slowdown or no slowdown, the end of the inflationary spiral is clearly in sight. If you see inflation abating with a high degree of probability, then you can begin to focus attention on growth. Yes, growth is slowing down. Under normal circumstances, the RBI would have waited until there were very clear signs of inflation coming down. But these are not normal circumstances. So the RBI has to make judgments about the importance of acting months before it would otherwise have done.

In what ways is the global financial crisis expected to impact economic growth in India?
The answer to that question will depend on how the global financial crisis plays out. But let me point to a very specific fallout that we do face. We are dependent on foreign investments to finance our very ambitious infrastructure growth plans. This is a position that has been emphasised by this government right from the beginning. That process has just about started and it is very critical to sustaining our growth as our infrastructure capacity is far below what it needs to be. The risk of credit pressures in the global market translating into reduced investment inflow into infrastructure projects is significant. How much of an impact there will be on fund flows into emerging markets remains to be seen. How long the crisis will last is also something that no one can predict at this point of time.

What is your estimate of fiscal deficit for 2008-09?
My estimate of the central government deficit is 6.2 per cent of GDP.