The BJP has dismissed speculation that it would be looking to replace RBI governor Raghuram Rajan, known for his hawkish stance on inflation control, should the party form the next government. “Just because he’s been appointed by someone else doesn’t mean we have an agenda to remove him,” Piyush Goyal, BJP’s treasurer told news agency Bloomberg in an interview.
“No government can dictate to the central bank. It’s an autonomous body and he holds a constitutional position. We don’t have any likes or dislikes,” said Goyal, who is a member of the standing committee on finance.
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“RBI is fulfilling its duty to make an effort to reduce inflation, but sadly the government has been lousily managed in the last few years,” Goyal said. “A government led by Modi will repress the concerns of any central bank leader,” he said Sunday.
In September, in his maiden policy barely a fortnight after he assumed charge as RBI chief, Rajan had raised rates at a time when hopes were for the contrary, in a direct message that price control remains the central bank’s top most commitment, even if it comes at the cost of slower growth.
He has raised rates thrice in the last seven months even as industry leaders have been demanding interest rate cuts arguing that high loan rates have discouraged firms to invest and hire more people.
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Latest price data shows that chances of a rate cut was unlikely in the short-term.
High inflation means the RBI, which will present its credit policy review in June, could hesitate to cut interest rates, a step needed to boost economic growth.
High vegetable prices and costlier staples such as rice pushed India’s wholesale inflation to a three-month high of 5.70% in March, while retail inflation quickened 8.31% during the month, as the next government stares at a daunting, and immediate, challenge to push growth and cool prices.
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The Indian economy, an engine for global growth till recently, has been caught in a tug-of-war between rising prices and sliding growth, a string of recent data has showed. Industrial output fell by 1.9% in February to a nine-month low, trade deficit widened to a five-month high of $10.5 billion while exports fell for a second consecutive month in March.
Besides, the spectre of a failed monsoon rain due to a probable El Nino looms large over the economy, which could push up food prices in the coming months.