The Reserve Bank of India cuts repo and reverse repo rate cut by 25 basis points (bps). Deputy Governor Rakesh Mohan believes FY10 current account gap is expected to be lower.
Mohan said the RBI has demonstrated its capacity to manage changes in government borrowing in the past one-year. "So I don’t expect any significant problem in managing government borrowing," Mohan added.
Here is a verbatim transcript of the exclusive interview with Rakesh Mohan on CNBC-TV18.
Q: What is the short-term growth trajectory?
A: We have not given any trajectory, but obviously given the current growth situation, it does mean that there would be low now and higher later. That’s about the best I can do in these circumstance, but I think it is a fair question and given the current circumstances that’s exactly what implies.
Q: Do you think that given this kind of a trajectory you will expect credit growth to go fairly significantly below that projection of 20% mark that you have set out?
A: No. Obviously the projection will be what we expect to happen. The overall projection that we have given is obviously for the fiscal year as a whole. So that’s what we are expecting to happen otherwise we wouldn’t give such a projection.
Q: Let me come to the borrowing programme. You have given an arithmetic data to suggest that you will be able to manage and yields have been falling rather significantly but what if the new government were to put additional fiscal pressure? Have you’ll kind of accommodated for that as well, some kind of pressure can be still be managed do you think?
A: I don’t think it would be correct on my part particularly at this point in time to give any view of what a new government might do with the Budget, with market borrowing more than or less than what has been currently provided. I think that we have demonstrated our capacity to manage changes in government borrowing in the past one-year. So I don’t expect that we would have a significant problem in either direction.
Q: Would there be a necessity to think that in the months or maybe quarters to come you may have to prevail upon the government to bring down savings rate and the small savings rate?
A: Again, I think that particularly given the current circumstances of elections in action, it would not be correct for me to give a view on administered savings rate administered by the government.
The only thing I can say is of course that to the extent that two expert group of boards do exist, one earlier chaired by Dr Reddy when he was the Deputy Governor, and then one chaired by me later. But a certain view has been given on the fixation of administered interest rates.
At that time the government had followed, not broadly speaking. So, it is difficult at this time to say what the government should or should not do as far as administered interest rates are concerned.
Q: Would you say that the external front and the rupee is at least for the moment the least of your concerns?
A: Given the very large global uncertainty, I don’t think it would be correct for me to say that the external front is not of concern. I think that in the current circumstances with what is going in the world, we do need to be awake and diligent and monitor very carefully all trends that take place internationally so that we can manage our own external account. Of course as far as the rupee is concerned, we don’t have a view.
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