Managing inflation without hurting growth a challenge: Subbarao
RBI governor D Subbarao today said the country was facing surging inflation and that monetary policy needed to be calibrated to manage it as well as support growth, a clear hint that drastic measures are needed to rein in soaring prices.business Updated: Jan 17, 2011 19:56 IST
RBI governor D Subbarao on Monday said the country was facing surging inflation and that monetary policy needed to be calibrated to manage it as well as support growth, a clear hint that drastic measures are needed to rein in soaring prices.
"A lot of other countries are still flirting with deflation ... still concerned that they might have deflation. On the other hand, we are having a surging inflation," the governor told the students of the Indira Gandhi Institute of Development Research (IGIDR) on their convocation in Mumbai on Monday.
"For the Reserve Bank the challenge is to calibrate monetary policy taking into account the demands of inflation management and the demand of supportive recovery," he said.
His comments come a week before the central bank in its widely-anticipated third quarter monetary policy review on January 25, is anticipated to raise the key policy rates by at least 25 basis points.
"When I meet other central bankers they tell me why don't you give us a bit of your inflation so that our growth will be faster. That's how desperately they want some inflation and how desperate we are to control our own inflation," the governor said.
He, however, added there was no template for monetary policy management or inflation management.
Headline inflation, based on wholesale price index, was spiked by rising food prices and jumped to 8.43% in December last year from 7.48% in November.
The RBI had last year upped its repo and reverse repo rates (short-term lending and borrowing rates) six times to 6.25% and 5.25%, respectively, to normalise a monetary policy that was on expansion mode since the onset of the global financial meltdown in late 2007.
While noting that there has been broad-based recovery across the globe, Subbarao said, "though we recovered faster from the crisis, inflation also caught up with us sooner than others.