Necessary to address inflation to preserve growth: Gopalan
Justifying the Reserve Bank's decision to raise key policy rates, a senior finance ministry official today said if inflation is left unattended it would adversely impact growth prospects in long run.business Updated: Jun 30, 2011 16:44 IST
Justifying the Reserve Bank's decision to raise key policy rates, a senior finance ministry official on Thursday said if inflation is left unattended it would adversely impact growth prospects in long run.
"Growth is also affected by inflation, if you leave inflation unattended, then it will impact growth," department of economic affairs secretary R Gopalan told reporters in New Delhi.
Gopalan, however, admitted that 25 basis points hike in repo and reverse repo rate will have a bearing on growth rate in the short run.
Continuing its efforts to contain inflation, the central bank raised key short-term lending and borrowing rates by 25 basis points each today for the 10th time since March, 2010.
While the short-term lending(repo) rate has been raised to 7.5%, the borrowing rate has been hiked to 6.5%.
The policy initiatives, according to RBI, are expected to contain inflation which stood at over 9% in May, much above the central bank's comfort level of 5-6%.