"Growth is as much a challenge as inflation. If government has to walk alone to face the challenge of growth, then we will walk alone," he said in his reaction to the RBI's second quarter policy review.
Chidambaram was apparently upset over RBI's decision to leave interest rates unchanged on inflation concerns despite the government unveiling a five-year fiscal consolidation road map ahead of the policy.
Although the RBI has lowered the Cash Reserve Ratio (CRR), the portion of deposit banks have to park with the apex bank, by 0.25 per cent, it did not cut interest rates in view on persistent inflationary pressures.
WPI inflation stood at 7.81 per cent in September, much above the RBI's comfort level of 4-4.5 per cent.
"Government is doing its best to send the clear message that we are on the path of fiscal consolidation. It is my hope that everyone will read and understand the government commitment to path of fiscal consolidation," Chidambaram said.
On the policy statement, he quipped: "I have not read the last few paragraphs of the statement but if it holds out hope for the future I look forward to that future".
He was apparently referring to the RBI's policy guidance of a likelihood of policy easing in the January-March quarter of the current fiscal.
Chidambaram further said: "Sometimes it is best to speak, sometimes it is best to remain silent. This is the time for silence".
After FM, Montek rains brickbats on RBI
Terming the decision of RBI to cut CRR a step in the right direction, Planning Commission Deputy Chairman Montek Singh Ahluwalia today said the need to push growth should take precedence over combating inflation.
"I can see that the RBI remains concerned about inflation. I think we need to watch what happens in inflation but probably the need to push the growth at this moment is little higher on agenda than the concern about inflation," Ahluwalia told reporters here.
Showing concerns over hardening inflation, the Reserve Bank today left the key interest rate unchanged but reduced cash reserve ratio by 0.25 per cent to inject Rs 17,500 crore liquidity into the financial system.
CRR or the portion of deposits banks have to park with the RBI now stands at 4.25 per cent while the repo rate, at which RBI lends to the system, has been retained at 8 per cent.
Ahluwalia said, "It was expected that they (RBI) would move in the direction that would be supportive of revival of growth. I do think that the reduction in the CRR is a step in that direction. Hopefully it would moderate pressure on the interest rates."
About RBI not doing enough to push growth, he said, "We have to push for growth anyway. Monetary policy is very important aspect of the growth push, but most of what need to be done for growth, has to be done by the government and weare going to do it."
He is of the view that CRR cut would have stronger impact on interest rate than simply adjusting the repo rate because bank does not lend freely at the repo rate and it does not play the role which FED fund rate do in the US.
On fiscal consolidation road map chalked out by the Finance Minister P Chidambaram, he said, "We are determined to bring the fiscal deficit down."
On whether monetary policy is in sync with fiscal policy, he said, "...enough has been done to indicate a start in other policies like fiscal consolidation, reforms and moving big projects... the direction that monetary should move is quite clearly to be supportive of that."
About the lowering of growth projection for this fiscal to 5.8 per cent this fiscal from earlier estimates of 6.5 per cent, he said, "If we do 5.8 per cent GDP growth this fiscal that would actually imply very significant improvement over the results that we have got for the first quarter."
"I think that the growth in the second quarter would be similar to first quarter. If we do 5.5 in the first six months, can we do better in next half. I think we can.
Therefore 5.8 per cent is not broadly off the mark," he added.
Mr. Finance Minister cannot only be considerate about the economics of the industrialists and business sector growths. Please consider about the inflation impact on economically backward who are under poverty and which comprises of over 50% of the country's population.
Chidambaram should have known it better than RBI Governor. Fiscal consolidation in the absence of any control over profligacy will further reinforce RBIs doagnosis. 'Ekla Chalo Re' theme song will not help PC at all.
The Finance Minister wants to be alone, stay alone, walk alone and talk alone. There is no need. He can walk with or take for a walk Mr.Manmohan Singh and a few steps behind, Mrs.Gandhi and Mr.Ahluwalia can walk, all the way. He is disappointed that RBI could not be used for votebank politics or retail politics. He has forgotten like other Finance Ministers, that RBI is an autonomous body, at least in paper. In today's comments he beat other congress lumniaries and had not given a chance to Mr.Digvijay singh. Mr.Digvijay Singh may have some proof that RBI may be dancing to the tunes of BJP. All these tamashas may perhaps come to an end if fresh elections come.
Even though RBI, keeping in view the prevailing inflationary conditions has not reduced the interest rates and kept the same unchanged yet infused additional 17500 crore in the economy,considering starting of busy season economic activities will pick up and there will be credit demand, because of availability of additional funds no financial sector will starve of funds, this will help all round growth will also check the inflation, and if government do not increase rates of basic necessities and amenities it may come down to single digit.
all the prices are at 2009 level the commuters at delhi mumbai calcatta and chennai are paying for metro and suburban the same of 1990's. tomato and allu is avaialable at the same cost of 1990's only people are using cars instead of cycles to go to the place of work.talking more than working at offices and getting more than tripled salary and perks and looting the comman man with the help of same reformists of 1990's and crying foul with them for all evils.this is the time for all good man to come to the aid of the nation to produce more to live prosperously.
Thank God that RBI has better brains than the people in Government. The current cause of economic crisis stems from Non-Governance, and not from Monetory policies.. Government agenda to cover up non-governance with monetory policy of freebies and turn the country to tailspin is firmly stopped by RBI. THanks to the Patriot and brainy RBI.. Dear RBI, please do not even accept Government agenda even from backdoor..because they do all these not in the interest of the Nation, but in the party;s interest in ensuing elections.
Chidambaram should walk the talk and show that fiscal consolidation is happening. For the common man, the inflation is a real concern than the growth of stock market. In last 4 years my expenses has gone up by 2 times (for the same standard of living). One of the main reason behind inflation is increase in property prices, medical cost. There is artificial shortage of housing/ commercial space, which is making all industrial activity/ business activities expensive. The big players (builders/politicians) are playing games to keep the property prices high. There is no control over pharma companies. The privatisation of medical and other education has again led to a rise in prices of these services.
FM must respect well established statutory bodies. As every one aware, RBI is doing great job by containing Inflation.. Growth is important at the same time, People should survive, who are very badly affecting as prices are raising every day in all aspects...
India's leadership should be bold to let market forces work their way. Stop subsidies and make people to pay international prices for commodities. Harsh as it appears people will quickly adjust, after initial protest. Reserve Bank is courageous. Govt. should also be courageous. Rao Nanduri
Whatever Finanance Minister P.Chidhambaram may do the things are not going to improve. We are these days living as previously on false and fake assurnces and promises fince 1947 firstly borowing food for millions of poor and then garibi hatao. Without Prejudice
Chiddu must have punted in the market? Hehehe!
I agree PC should keep quiet. He shared his thought process and has taken a few steps. He should not mind to remain silent till people see some fruits and join him. Even I am not convinced that they will actually do something good. See 7 years of bad governance is to their credit. RBI cannot trust on this government because they do not have majority in the parliament and can roll back with 'fight'.
Now the count down will begin for the RBI governor's exit. How dare he supercede FM's policy.