RBI cautioned against hawkish monetary policy stance

The country's chief statistician Pronab Sen has cautioned RBI against
taking a hawkish monetary policy stance, saying too many measures to
control inflation can be detrimental to growth.

"Very very strong measures (monetary) can be detrimental to growth,"
Mr Sen said, while inaugurating a workshop on the National
Consultation on Certification of Project Managers on Wednesday.

Core inflation entered provisionally double digits in May, fuelled by
over 16 per cent food inflation.

While the Government has been projecting the economy to expand by 8.5
per cent this fiscal, it has acknowledged inflation as a major cause
for concern.

Asked if the Reserve Bank of India could take some monetary steps, Mr
Sen said: "Yes, it could as core inflation is starting to get
worrying. But it is not just inflation, it is full bunch of other
sectors that RBI need to take into account (before tight ening of the
money supply)."

Factory output grew at a healthy rate of 17.6 per cent in April, but
higher interest rate regime could curtail corporate spending and hit
borrowing for new investment — key to economic growth.

Asked whether RBI will raise the amount of deposit that banks are
mandated to park with the apex bank (CRR) or the short-term lending
rate (repo rate), Mr Sen said, "Whether it is CRR or repo rate, it
depends on the diagnosis of the problem."

Asked when the apex bank should take the monetary steps, he said,
"Anytime, RBI has to take a call on that."

In April, RBI had hiked key short-term rates and CRR by 25 basis
points each to rein in inflation.

The apex bank hiked repo and reverse repo by 25 basis points each to
5.25 per cent and 3.75 per cent, respectively.