India has come out unscathed by the global financial crisis, but walks a tightrope in its policies as it balances growth with stability, Reserve Bank Governor Duvvuri Subbarao said on Thursday. The crisis has underlined the world in which nations are linked in a web, he said.
“We need to take measured and timely action and make a balanced judgement—not to be too benign, but also not go overboard with excessive or premature tightening (of money supply),” Duvvuri Subbarao told a conference of the Indian Banks Association in partnership with industry chamber FICCI on global banking.
Subbarao said coordination between the world’s central banks was key to ensure a smooth exit made from policies crafted to ease recessionary pressures.
“Coordination is like a win-lose game and therefore as a country if I ease my policies I need other countries to also do the same or I lose out,” he said. He said he could not put a time-frame for India’s exit from its current policy stance, but it would have to be sooner than other central banks.
“We have to make a judgement call taking all factors into consideration, however we will have to exit sooner as inflationary pressures build up,” Subbarao said.
He said central bankers needed to measure stability, choose the right regulatory model and maintain a balance between fiscal stability and central bank independence.“We will not slow down on reforms, but will surely rework the road map to reflect the lessons of the crisis,” he said.