New Delhi: Continued monetary tightening by the Reserve Bank of India might moderate growth in the short-term but the long-term prospects remained buoyant, Finance Minister Pranab Mukherjee said on Friday.

'Monetary measures may moderate growth rate in the short-term if it continues,' Mukherjee said while addressing a banking conclave organised by Assocham.  However, the Finance Minister said that medium term growth prospects continued to remain buoyant. 

Reserve Bank of India Thursday hiked repo rates by 25 basis points in a bid to curb inflation and indicated that more such increases were in the offing.  With more such hikes on the horizon, industry has been clamouring policy makers to hold off more increases in key interest rates saying it was hurting capacity expansion and making cost of operations go up. 

The Finance Minister, however, was hopeful of still meeting growth targets in spite of the recent industrial output slowdown. The government had set 8.75 percent (with a margin of 0.25 percent) as the gross domestic product (GDP) growth target for the current fiscal.  'Industrial growth has slowed down recently. But the overall growth targets remain intact for the current fiscal,' said Mukherjee. 

Mukherjee also said GDP had accelerated at a fast pace in the last fiscal because of increased government spending but it had come at a cost of high fiscal deficit.  'We have to bring fiscal discipline. If high deficit continues at this time it will be disastrous,' said Mukherjee.  Commenting on high inflation, Mukherjee said it was mainly due to mismatch in supply and demand.

(Agencies)