Reserve Bank of India Governor Shaktikanta Das said on Saturday that credit growth momentum is picking up and ruled out any possible increase in inflation due to proposals introduced in the 2020-’21 Union Budget, PTI reported. Das asserted that the government is maintaining “fiscal prudence”.
Retail inflation spiked to 7.59% in December 2019, the highest since May 2014, government data released earlier this week showed. Wholesale price inflation on the other hand, rose by 3.10%. Das said the main reason for inflation is rise in food prices, like milk, fish, and various protein related items. He said core inflation has risen slightly due to revision of telecom companies’ tariffs.
Das, at the first meeting of the RBI after the Budget was presented, also said he hoped that transmission of rate cuts will improve. The meeting, which was also addressed by Finance Minister Nirmala Sitharaman, discussed various Budget proposals. “The direct inflationary impact of any budget is fiscal deficit number, when borrowing goes up, but the government has adhered to the principle of fiscal prudence,” Das said.
The Centre had raised the fiscal deficit target for 2019-’20 to 3.8% of Gross Domestic Product, after a shortfall in its revenue.
Sitharaman said the government is monitoring farm credit given by banks in rural areas. “Credit limit has been expanded,” she said. “I am sure it is based on local ground level requirement...we expect the demand to grow and credit requirements to also meet up with it. I am actually closely monitoring banks and their extension of credit facility particularly to rural areas.” The Centre has set the farm credit target for the 2019-’20 financial year at Rs 13.5 lakh crore.