If India want to control high inflation, RBI Governor D Subbarao said compromise in growth is “inevitable” amid efforts to bring down prices to acceptable levels. RBI Governor D Subbarao accepted the criticism that even after raising interest rates and running a tight monetary policy, inflation is still “high and persistent” and growth has been hurt. But there is no other way explains Governor. He said the sacrifice in growth is short-term and if the inflation is under control growth will be more stable. Inflation based on the Wholesale Price Index stood at 6. 87 percent in July which is above RBI’s comfort level of 5-6 percent.
“In order to support growth, we need to keep interest rates low but in order to rein in inflation we have to keep interest rates high. The challenge is how do we manage growth-inflation trade off,” he said.
“In order to support growth, we need to keep interest rates low but in order to rein in inflation we have to keep interest rates high. The challenge is how do we manage growth-inflation trade off,” he said.
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