India may achieve its growth target for this year even after the longest string of monetary tightening in a decade, Finance Minister Pranab Mukherjee said.
Mukherjee said he is “still holding” the projection he made in the budget that India will achieve growth of about 8.5 percent in the current year. If the situation deteriorates, there “may be a downside slide, but I’m not expecting that,” he said in a Bloomberg News interview today in Washington.
Reserve Bank of India Governor Duvvuri Subbarao raised the benchmark repurchase rate at his last review on June 16, the 10th increase since the start of 2010, saying “domestic-inflation risks remain high” and slowing economic growth may be unavoidable.
The central bank’s string of interest rate increases to control the demand-side response to inflation is “timely and appropriate, and is not going to affect growth as such,” Mukherjee said. The current fiscal year will end in March 2012.
Exports are rising even with the slowdown in the global economy, including in the U.S., with which India wants to expand trade, he said.
“Exports are picking up, not merely in respect to the U.S. but also other countries that we have as export destinations,” Mukherjee said. “Of course, unless growth is robust, there will not be demand,” he said, adding he is “not deeply concerned.”
He is visiting Washington to participate in the second U.S.-India Economic and Financial Partnership meetings.
At an event in Washington yesterday, Mukherjee said fast inflation is “an important constraint” preventing India from achieving higher growth. Even so, the country “can live with” inflation of between 6 percent and 6.5 percent, he said.