D&B predicts further monetary tightening

B D Narayankar

DUN AND Bradstreet (D&B) has predicted further tightening of monetary policy in the event of high interest rate regime, subdued demand conditions and high raw materials prices.

According to a press release issued by the company, the Gross Domestic Product (GDP) grew merely by 7.92 per cent during Q1 financial year (FY) ’09 as compared to 8.76 per cent during Q4 FY ’08. Industrial production too slowed down substantially and registered an average growth of 5.70 per cent during Apr-Jul ’08 period from 9.78 per cent during Apr-Jul ’07.

"In line with D&B expectations, GDP growth moderated to around 8 per cent during Q1 FY ’09," said Kaushal Sampat, chief coordinating officer (COO), Dun & Bradstreet, India.

"The moderation in growth is significant, especially when compared with 9.24 per cent growth during Q1 FY 0’8. Additionally, the moderation in growth of Gross Fixed Capital Formation to 8.96 per cent in Q1 FY ’09 is indicative of a slowdown in investment activity, and will have a bearing on industrial production in future. Going forward, given the high interest rates and low consumer demand, industrial production is expected to remain subdued."

Sampat further stated, "Although moderation in international crude oil and edible oil prices have provided some respite to surging inflation in the last few weeks, headline inflation continues to be in double digits and thus remains an overriding concern for policymakers. With growth in money supply and bank credit still above Reserve Bank of India’s (RBI) target rates, we expect further monetary tightening."