The Hindu : National : "No sign of economy overheating"

Online edition of India's National Newspaper
Friday, Nov 03, 2006
ePaper

National

National

"No sign of economy overheating"

Special Correspondent

Raising repo rate "well-intended"

NEW DELHI: Finance Minister P. Chidambaram on Thursday said there were no signs of the economy overheating, even as he described the 0.25 per cent increase in repo rate by the Reserve Bank of India (RBI) as "well-intended."

Speaking to newspersons here, Mr. Chidambaram said: "I don't believe there is overheating [in the economy] ... [The] RBI has only cautioned. And if they had not taken action, I think some sectors may have shown some signs of overheating."

After releasing the busy season credit policy on Tuesday this week, the RBI Governor Y.V. Reddy pointed out that the hike in repo rate was a clear signal to banks that borrowing from the Central bank could be an expensive proposition.

"Raising the repo rate is only a signal that getting liquidity from the RBI will be expensive ... In particular, we have asked for greater fairness and transparency in regard to the housing sector because we have received complaints about somewhat less than transparent practices," Dr. Reddy said.

Inflation: no sharp decline

Inflation, now at 5.26 per cent, is unlikely to see a sharp downturn in the short-term and it is expected to moderate only in the medium-term, the Finance Ministry's Chief Economic Adviser Ashok Lahiri said here on Thursday.

"No sharp decline in inflation can be expected... In the medium-term, the target is to bring down inflation."

Explaining the reasons for the recent spurt in inflation and ways of dealing with primary commodities and high crude prices, he said: "The question is if uncertainties continue, what will happen. Prices are a function of what happens in the world market".

Printer friendly page
Send this article to Friends by E-Mail

National