Focus on growth and jobs, not just prices: PC to RBI | delhi | Hindustan Times
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Focus on growth and jobs, not just prices: PC to RBI

delhi Updated: Aug 14, 2013 23:03 IST
HT Correspondent
P Chidambaram

Finance minister P Chidambaram on Wednesday said the Reserve Bank of India (RBI) must look beyond its conventional focus on taming inflation and should also target employment and growth as its key objectives.

“The mandate of price stability must be seen as part of the larger mandate and the larger mandate is growth and employment,” he said in the Rajya Sabha while replying to a debate on state of economy.

“Yes the mandate of central bank traditionally is price stability. In fact there are many who would argue that should be only goal of the central bank. But I believe, my party believes, my government believes that price stability must be seen as part of the larger mandate of growth and employment,” the finance minister said.

The central bank under RBI governor D Subbarao, whose term ends on September 4, has withstood mounting pressure from the government and industry bodies to cut interest rates.

The hawkish stance had sometimes evoked unusually strong comments from the government mirroring growing differences between India’s top financial administrators.


India’s macroeconomic managers are struggling to steer the economy hit by a sharply sliding rupee, crippling industrial deceleration and dipping investor sentiment.

Chidambaram said the government will be able limit in the current account deficit (CAD)—the difference between dollar inflows and outflows---at levels much lower than the previous year’s record 4.8% of GDP.

“We will leave no stone unturned to contain current account deficit at $70 billion (in current fiscal) and add to the foreign exchange reserves...As fiscal deficit is a red line, the CAD is also a line and every endeavour will be made not to breach that line,” he said.

The finance minister said India will be able finance the CAD without dipping into its pool of foreign exchange reserves.

“Given our fiscal deficit, given our CAD, there will be some pressure on rupee and rupee will indeed depreciate. All that we are saying is that we cannot allow the rupee to go into a free fall. We are arguing for a stable rupee,” the finance minister said.

On the issue of rise in prices of essential commodities, he said although the wholesale price-based inflation has come down to below 5% in five months till June, efforts would have to be made to address the supply side problems to bring down the retail inflation.