After a walking a wedge in his first monetary policy statement, RBI governor told
Rajendra Palandein an interview that quick-fix actions over the past six weeks had borne fruit, but challenges remained.
The policy seems confusing as it makes hawkish noises days after cutting the CRR and the repo rate. Suddenly inflation is a worry, high credit a concern and growth the last priority. Why is it so?
We are going through very uncertain times. Growth, price stability and financial stability are three equal concerns. I am not willing to say one is over (more important than) the other…When inflation is at 11.04 per cent, you cannot let your guard slip. When we injected liquidity, it was to ease the constraints in the financial system. Credit should go to productive areas and not to unproductive areas.
Is RBI against an easy money policy? It seems so.
We had consulted a number of stakeholders. We had consulted the government. And the government has a responsibility in a democracy for the smooth functioning of the macro-economic system. Others had been consulted but the decision was ours.
What is RBI's view on the growth of the economy going ahead given the difficult global conditions?
If the global recession is going to be a little longer, it is going to affect us. Our fundamentals are strong, we are going to return to the higher growth trajectory, but it depends on the global conditions.
What is your message to the bankers?
There are two clear messages to the bankers. The first message was that credit must continue to flow for productive sectors, particularly for loans that have already been sanctioned, particularly for small and medium enterprises and at the same time must be cautious about credit quality. The second message was that RBI is there to manage the system, to manage the liquidity situation.
If credit growth needs to drop to 20 per cent from 29 per cent now, then there will hardly be any lending happening in the next five months…..?
Our immediate goal is to see that financial stability is there, the downturn in inflation continues and the moderation in growth is contained and we return to the higher growth path as soon as possible.
Are all the actions taken to prop up the equity market?
No, not at all. That has never been a consideration.