Sacrificing economic growth necessary to rein in inflation says Subbarao

RBI governor D Subbarao said inflation cannot be controlled without sacrificing some growth that is inevitable but the sacrifice of growth to manage inflation is only in the short term

Kozhikode: Ahead of its first quarter monetary policy review on 31st July, the Reserve Bank of India (RBI) said sacrificing some economic growth is necessary to rein in price rise, reports PTI.

"Inflation hurts poorer people much more than it hurts rich people. You cannot control inflation without sacrificing some growth that is inevitable but the sacrifice of growth to manage inflation is only in the short term," RBI governor D Subbarao said while delivering a lecture at the Indian Institute of Management in Kozhikode.

In the medium term, there is actually no trade-off between growth and inflation, he added.

In view of slowing economic growth, there is clamour for rate cuts to fuel expansion. In its 18th June policy mid-quarter review, the central bank citing inflation as main reason had kept the interest rate (repo rate) unchanged despite widespread anticipation of at least 0.25% reduction.

Inflation inched up to 7.55% in May from 7.36% in the previous month mainly due to spurt in prices of vegetables and costlier petrol.

Meanwhile, RBI also said it is planning to introduce a pilot project for issuing of plastic currency as it has proven to be economical and probably will save money.

Delivering the lecture on 'Reserve Bank of India: Making a Difference in Everyday Life' at the IIM-Kozhikode, Subbarao said, "we have contemplated this some 15 years ago. But gave it up. Now we are trying to do it again as a pilot experiment."

A lot of research and analysis went into this about its cost and acceptability, he added.

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