Rajan worries about poor monsoon, predicts 7% growth after 3 years
RBI Governor Raghuram Rajan (Photo: PTI)
New Delhi: Amid growing chorus from finance ministry that interest rate cut is coming soon, RBI governor Raghuram Rajan has maintained that inflation is still high. “Inflation still remains high on supply side rigidities. Food inflation is a source of discomfort and given the sub-par monsoon this year, there is a need to keep an eye on food inflation,” Mr Rajan was quoted as saying by Citi which hosted him at a packed investor summit in Boston, USA.
He said that the aim of the RBI was to bring the consumer price index based inflation at 6 per cent by 2016. RBI governor said that monetary tightening, fiscal consolidation and food management policies have resulted in inflation coming off from the peak of 11.2 per cent in Novem-ber to 8 per cent now.
RBI will announce the bimonthly review of the policy on September 30. Bringing down inflation has topped the agenda of Mr Rajan who has hiked rates thrice in his year-long stint as the central bank Governor.Recently a series of commentary from the finance ministry had indicated that it wants interest rates to come down given inflation has “moderated”.
“We see inflation is going to come down further and we hope as the (RBI) governor has in his recent credit policy stated, RBI will not hold interest rates high any longer than is necessary and I hope that threshold we will reach soon enough,” finance secretary Arvind Mayaram had said during an interaction with the industry some two weeks ago.
Last week even finance minister Arun Jaitley had clearly indicated that his ministry wants the RBI to cut interest rates to give a helping hand to the economy, which is showing signs of revival. Asked when he saw the RBI cutting interest rates Mr Jaitley had said, “Left to myself, I hope very soon.
I am sure that those who decide also heard your question.” During Citi’s investor conference, Mr Rajan said that sharp slowdown in gross domestic product from 8-9 percent growth to 4-5 per cent in the last two years was caused by issues such as environment and land acquisition problems, delays in withdrawal of fiscal stimulus, irregularities around allocation of natural resources and slow governance.
( Source : dc correspondent )
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