Sounding a note of caution on the inflationary impact of rising global crude oil prices ahead of the RBI’s final monetary policy review of the fiscal, Finance Minister Arun Jaitley on Monday said that lowering interest rates is a decision entirely in the domain of banks.
In an interview following the presentation of the Budget 2018-19 last week, he also said that both oil prices and the monsoons are factors that could come in the way of India realising GDP growth of 8 percent. “Banks will decide on these matters,” Jaitley said in response to a query whether lower interest rates are being ruled out in view of the latest inflation data and the current oil prices.
“One of our eyes is on the monsoons and the other on the price of oil. On oil prices we are at the outmost periphery of comfort. If it rises further, it throws up a challenge as far as inflation is concerned. “Monsoon is a factor for agricultural demand and oil prices have reached the periphery of our limit,” he added. The government’s annual report on the economy tabled in Parliament before the Budget forecast a GDP growth of 6.75 in the current fiscal, to be followed by 7 to 7.5 percent in 2018-19.
The Economic Survey 2017-18 authored by Chief Economic Adviser (CEA) Arvind Subramanian, however, also said there were both upside potential and downside risks to this “baseline forecast” with rising global crude oil prices being the most potent among future challenges. “GDP is analysed in a global situation and during the boomperiod it can grow by 8-9 percent. But this is not the situation right now in the country,” Jaitley said. “If we reach 8 percent, it is a good achievement for the country as no other country has achieved it,” he added. In line with the earlier official estimate of the country’s GDP growth in the last fiscal, demonetisation-hit India’s gross domestic product during 2016-17 grew at 7.1 percent, Central Statistics Office (CSO) data showed last month.