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Prices to determine rates: Rajan

HT Correspondent, Hindustan Times  Mumbai, November 15, 2013
First Published: 23:31 IST(15/11/2013) | Last Updated: 23:33 IST(15/11/2013)

The Reserve Bank of India (RBI) governor Raghuram Rajan on Friday said multiple factors, in addition to inflation, will determine monetary policy scheduled to be announced in December.


“The weak state of the economy, as well as the good kharif and rabi harvest, will generate disinflationary forces that will help, and we await data to see how these forces are playing out. No single data point or number will determine our next move,” Rajan said in Mumbai.

With both retail and wholesale inflation high, the expectation is that the RBI will raise policy rates further to counter rising prices.

Inflation as measured by the wholesale price index was at an eight-month high of 7%, while retail inflation stood at a seven-month high of 10.09% in October.

In the past two consecutive policies, the RBI raised the repo rate by 0.25 per cent each due to the worsening price situation. The next policy is scheduled on December 18.

Meanwhile, Rajan called for forceful action to counter the atmosphere of cynicism, which has slowed down the decision-making process, and to tap growth opportunities.

“That cynicism does not just permeate the foreign press and their audiences, but also infects our domestic debate. Every policy is greeted with suspicion and scrutinised for evidence of malfeasance,” he said while addressing BANCON 2013 in Mumbai.

Rajan said measures will be announced to incentivise banks for early detection of bad loans and better resolution of non-performing assets.

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