RBI deputy governor KC Chakrabarthy on Saturday said it is not possible to sustain high growth with high inflation as there is always a trade off between the two, to which RBI has always responded by raising rates.
"There is always a trade-off between high growth and high inflation and RBI has always responded to the situation by raising rates. It is not possible to sustain high growth with high inflation," he said while delivering a lecture on Voice of Tomorrow-Fuel to Excel in Coimbatore.
Contending that RBI cannot be blamed for continuous increase in rates, he said the cost of services and products had gone up due to supply side factors.
To bring down inflation "we have to bring technology and innovation to reduce cost of production... though a daunting challenge, it is not impossible to achieve 10% growth."
He also said RBI was as liberal as any other central bank in the world in allowing foreign banks to open branches in the country.
To a question on there being no set guidelines for pre-closure of loans, he said, "We (RBI) are not into micro managing banks. We are creating a level playing field."
When asked about the likely impact of hike in diesel and LPG prices on inflation and whether there is a possibility of another bout of monetary tightening, he said RBI has to study the situation.
"We have to analyse, see the impact before coming to any conclusion," he said.
The lecture was organised by The Hindu and local Chapter of Indian Chamber of Commerce and Industry.