The new government should respect the appointment of Reserve Bank Governor Raghuram Rajan who was selected to head the central bank on the basis of his reputation, Finance Minister P Chidambaram has said.
"The central bank governor was appointed based on his reputation... Every government must respect this appointment," he said in Astana. His comments to Bloomberg on the sidelines of ADB's annual conference at Astana, Kazakhstan, come amid media speculation that BJP-led NDA, which is projected to perform better than the Congress-led UPA in the general elections, may not be keen to retain Rajan as RBI Governor.
Rajan had last month dismissed the talks about his differences with BJP as "media invention", saying "I haven't had any discussion with the new government. I think its all press invented difference. I think it should be seen as speculation rather than any actual differences". His comments came against the backdrop of certain BJP leaders questioning his policies to deal with the current economic woes. During the 8-month stint, Rajan has raised key policy rate thrice by 0.25 per cent each.
In an interview to CNBC at Astana, Chidambaram said: "I have done more heavy lifting in the last 12 months than the RBI... I have done what needs to be done on the fiscal side, the central bank has done what needs to do on monetary side. Now we have to address the supply side constraints". Answering questions on growth, the Minister said Indian economy will pick up pace and will grow at 6 per cent in the current fiscal.
Chidambaram said: "We have unblocked a very large number of projects which had stalled... When the projects are completed and begin production, you will see all that adds to the economy." The economy grew is estimated to have grown at 4.9 per cent in the 2013-14 fiscal after touching a decade-low level of 4.5 per cent growth in 2012-13.
"As long as we have high inflation how can you ask the RBI to lower rates dramatically, Chidambaram said, adding that "we have to address supply side constraints. (We have to) bring down inflation before the monetary policy can come to aid of growth". WPI inflation in March stood at 3 month high of 5.7 per cent, while the CPI or retail inflation too inched up to 8.3 per cent. Chidambaram also said that the fiscal deficit and the current account deficit have been contained and investments have started pouring in.
In the interim Budget, he had said that the fiscal deficit would be contained at 4.6 per cent of GDP, lower than the earlier target of 4.8 per cent. The deficit in 2012-13 was 4.9 per cent of the GDP