Click to play videoNew Delhi: The proverbial ‘you lose something to gain something’ comes to play in the country’s current economic scenario.
Inflation will eat into growth. This is something that even the Chairman of the PM's Economic Advisory Council, C.Rangarajan has now conceded and admitted that the economy will grow no more than 7.5 to 8% this fiscal, lower than even the RBI forecast of 8%.
However, he felt that inflation itself would moderate by March next year on the back of strong monetary and fiscal action by the government
C Rangarajan says, “There are certain factors both domestic and global which may add to the slowdown but we still think that we will manage a growth of 7.5. I expect inflation to moderate to about 8% by March though.”
But even though crude has softened to below the 120 per dollar mark, Rangarajan is still cautious and expects the current tight monetary stance to continue and the rates to remain at a high.
His views are also concurred by top bankers like HSBC head honcho, Naina Lal Kidwai.
Kidwai says, “I think that interest rates will remain at these levels.
In fact it will remain flat from now on for some time, but despite this, credit offtake is still buoyant, but the bad news is that top banks like HSBC are still hawkish on inflation.”
The banking giant believes that inflation will continue to be in double digits for some time and if these conditions persist, interest rates will remain high in turn hurting corporate margins in the near term.
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