Sticking to India's growth story, finance minister P Chidambaram on Tuesday said the economy will grow at over 6% in 2013-14, despite several domestic and global challenges including falling investments, a widening current account deficit, a depreciating rupee and a sharp slowdown in advanced economies.
Ruling out chances of any immediate interest rate hikes by banks, the finance minister urged Indians to moderate their demand for gold to reduce a ballooning current account deficit (CAD) that has caused the rupee to weaken. CAD, the difference between dollar inflows and outflows, touched a record high of 4.8% in 2012-13.
"This year, by all estimates, it will be 6% or slightly above... this is not satisfactory level of growth...," the minister said in Jaipur.
India registered a decade-low growth rate of 5% in 2012-13.
Asserting that the rupee's value will be market determined, Chidambaram said the measures announced by the Reserve Bank of India on Monday to boost a falling rupee did not have anything to do with the upcoming monetary policy review on July 30 and may not impact interest rates of banks. "These measures (by RBI) should not be read as prelude to any policy rate changes," he said.
"This has nothing to do with upcoming policy review. I don't expect banks to raise interest rates as a result of the measures."
Bankers also said that the RBI's moves are unlikely to affect interest rates. "The impact on loan growth depends on how long these measures stay. Deposit rates do not have a close correlation with the money market," SBI chairman Pratip Chaudhuri said.
The finance minister also urged all Indians to curb their appetite for gold, though he ruled out a ban on imports of the precious metal, which has resulted in an outflow of $50 billion. "We cannot completely ban import of gold. There is a long-time attachment to gold in this country… but can we for sometime moderate the demand for gold?," he said.
Chidambaram said inflation will ebb if crude prices do not rise again. "But I can't promise you zero inflation... If crude oil prices do not spike up again, we can contain inflation to a tolerable level," he said.