‘Inaccurate to say RBI is obsessed with inflation’
18 Aug 2013 9:09 PM GMT
Days before he steps down as Governor of RBI, a candid D Subbarao on Saturday characterised as 'inaccurate and unfair' the contention that the central bank was 'obsessed with inflation, oblivious to growth concerns'.
Terming as oversimplification that governments are for growth and central banks are for price stability, he said, it was another oversimplification to assert that there is a tension between growth and inflation and that one has to play a trade off between the two in policy making.
'To contend that the Reserve Bank is obsessed with inflation, oblivious to growth concerns, I think, is both inaccurate and unfair,' he said. Subbarao's remarks come against the backdrop of Finance Minister P Chidambaram's assertions in recent weeks that RBI should not focus solely on containing inflation but also look at the larger mandate of growth and job creation.
The Governor, who will demit office on 4 September, spoke on growth-inflation balance and said the first and possibly the most important debate was about balancing between growth and inflation in the policy context.
'This is a balance that both governments and central banks struggle with. In my view, this debate has been clouded by some oversimplifications.
'One such oversimplification is to say that governments are for growth and central banks are for price stability. Another oversimplification is to assert that there is a tension between growth and inflation, and that one necessarily has to play the trade-off between growth and inflation in policy making,' Subbarao said.
Subbarao said RBI's monetary policy aimed at three objectives-price stability, growth and financial stability.'The Reserve Bank is committed to inflation control, not because it does not care for growth, but because it does care for growth. An environment of low and stable inflation is a necessary precondition for sustainable growth.
Terming as oversimplification that governments are for growth and central banks are for price stability, he said, it was another oversimplification to assert that there is a tension between growth and inflation and that one has to play a trade off between the two in policy making.
'To contend that the Reserve Bank is obsessed with inflation, oblivious to growth concerns, I think, is both inaccurate and unfair,' he said. Subbarao's remarks come against the backdrop of Finance Minister P Chidambaram's assertions in recent weeks that RBI should not focus solely on containing inflation but also look at the larger mandate of growth and job creation.
The Governor, who will demit office on 4 September, spoke on growth-inflation balance and said the first and possibly the most important debate was about balancing between growth and inflation in the policy context.
'This is a balance that both governments and central banks struggle with. In my view, this debate has been clouded by some oversimplifications.
'One such oversimplification is to say that governments are for growth and central banks are for price stability. Another oversimplification is to assert that there is a tension between growth and inflation, and that one necessarily has to play the trade-off between growth and inflation in policy making,' Subbarao said.
Subbarao said RBI's monetary policy aimed at three objectives-price stability, growth and financial stability.'The Reserve Bank is committed to inflation control, not because it does not care for growth, but because it does care for growth. An environment of low and stable inflation is a necessary precondition for sustainable growth.
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