Finance minister P Chidambaram on Friday said the economy is currently more stable than it was 18 months ago with the rupee strengthening against the dollar and both fiscal and current account deficits coming under control. The finance minister also said that measures taken by the government and the Reserve Bank of India have led to the stability.
"The economy certainly is more stable today than what it was 18 months ago... that is reflected in the strengthening of the rupee, in heightened interest of investors, both FDI and FII… I am glad that the measures taken by the RBI and those taken by the government are complementing each other and have delivered substantially the goal of stability that we had set for ourselves 18 months ago," Chidambaram told reporters after his his customary post-budget meeting with the RBI board.
The correct approach, he said, was to set an inflation target by the government and then leave it the regulator to find ways to achieve it. RBI governor Raghuram Rajan had earlier said the government must set inflation target through Parliament.
"I think that is the correct approach...the sovereign has the right to set the target and then the central bank has the mandate to take steps to achieve the target," the finance minister said.
Price stability and growth can be achieved if the government and the RBI continued to work together, he added.