Prime Minister’s Economic Advisory Council Chairman C Rangarajan on Thursday said that wholesale price-based inflation has reached uncomfortable levels and some action from the Reserve Bank of India (RBI) is needed to curb demand-side pressures, he said.
“I don’t know what the RBI will do. All I can say is that the inflation rate has reached a very uncomfortable level.”
Double-digit inflation has stayed high for the last four months and could no longer be treated as triggered purely by food inflation, he said. The manufacturing sector, too, was showing a high degree of inflation.
Besides, banks should be discouraged from excessive risk taking to ensure a healthy financial system, he said. “There is no argument that the regulatory regime needs to be restructured ... Excessive risk taking and leveraging by banks need to be discouraged by appropriate regulatory measures.”
The regulatory regime should be re-structured to make the banking system more sound, he said and called for improvement in the corporate-bond market to help small firms raise funds.
“Therefore some action in the demand side is called for.”