Inflation still too high for rate cut, hints Subbarao
17 Jan 2013 6:24 AM IST
Ahead of its third quarterly policy, the Reserve Bank of India (RBI) has said that inflation was still high and there was no room for fiscal or monetary stimulus to boost growth in slowing economy.
'When growth is slowing down you can stimulate the economy either by monetary easing or by fiscal stimulus, but both monetary and fiscal side have no room for stimulus. So that is the big concern,' RBI Governor D Subbarao said while addressing Indian Institute of Management (IIM) students on Tuesday evening in the capital of north Indian state Uttar Pradesh.
Notwithstanding expectations of interest rate cut by the Reserve Bank of India (RBI) in its quarterly monetary policy on 29 January on back of declining inflation, Subbarao said, 'Inflation has come down, (it is) still high'.
Although the inflation, based on movement in wholesale prices, touched the three-year low of 7.18 per cent in December, the retail inflation continued to remain in double digit at 10.56 per cent. It only indicates that easing Wholesale Price Index (WPI) was not providing any relief to the consumers from spiralling prices. The WPI inflation at 7.18 per cent was also much above the central bank's comfort level of 4-5 per cent. The inflation has not declined to the expected levels despite tight monetary stance pursued by the RBI to check price rise. With industrial output contracting by 0.1 per cent in November, the industry has stepped up its demand for interest rate cut by the RBI in its forthcoming policy.
The economic growth, which slipped to nine-year low of 6.5 per cent in 2011-12, is expected to decline further to 5.7-5.9 per cent in the current fiscal. On inflow of fake Indian currency notes in the market, Subbarao said that some criminal and anti-social elements were involved in it (circulations of fake notes) and RBI was doing whatever is possible to check its inflow.
‘PROVIDE BANKING FACILITIES TO EACH SMALL TOWN’
RBI Governor D Subbarao on Wednesday asked banks to meet the target of providing banking facilities to small towns soon.
‘It is unfortunate that 90 per cent towns of the country did not have banking facilities. The target of RBI is to ensure that every family have a bank account,’ Subbarao said while addressing a programme here.
He said that there are six lakh towns in the country, of them one lakh are in Uttar Pradesh.
‘I urge all the banks to soon fulfil target of providing banking facilities in these towns,’ he added.
Accepting that inflation had increased in past few years, the RBI governor said that though they had somewhat succeeded in containing it in past two years, it is still there.
‘It is our priority to check price-rise and will remain so’, he said.
'When growth is slowing down you can stimulate the economy either by monetary easing or by fiscal stimulus, but both monetary and fiscal side have no room for stimulus. So that is the big concern,' RBI Governor D Subbarao said while addressing Indian Institute of Management (IIM) students on Tuesday evening in the capital of north Indian state Uttar Pradesh.
Notwithstanding expectations of interest rate cut by the Reserve Bank of India (RBI) in its quarterly monetary policy on 29 January on back of declining inflation, Subbarao said, 'Inflation has come down, (it is) still high'.
Although the inflation, based on movement in wholesale prices, touched the three-year low of 7.18 per cent in December, the retail inflation continued to remain in double digit at 10.56 per cent. It only indicates that easing Wholesale Price Index (WPI) was not providing any relief to the consumers from spiralling prices. The WPI inflation at 7.18 per cent was also much above the central bank's comfort level of 4-5 per cent. The inflation has not declined to the expected levels despite tight monetary stance pursued by the RBI to check price rise. With industrial output contracting by 0.1 per cent in November, the industry has stepped up its demand for interest rate cut by the RBI in its forthcoming policy.
The economic growth, which slipped to nine-year low of 6.5 per cent in 2011-12, is expected to decline further to 5.7-5.9 per cent in the current fiscal. On inflow of fake Indian currency notes in the market, Subbarao said that some criminal and anti-social elements were involved in it (circulations of fake notes) and RBI was doing whatever is possible to check its inflow.
‘PROVIDE BANKING FACILITIES TO EACH SMALL TOWN’
RBI Governor D Subbarao on Wednesday asked banks to meet the target of providing banking facilities to small towns soon.
‘It is unfortunate that 90 per cent towns of the country did not have banking facilities. The target of RBI is to ensure that every family have a bank account,’ Subbarao said while addressing a programme here.
He said that there are six lakh towns in the country, of them one lakh are in Uttar Pradesh.
‘I urge all the banks to soon fulfil target of providing banking facilities in these towns,’ he added.
Accepting that inflation had increased in past few years, the RBI governor said that though they had somewhat succeeded in containing it in past two years, it is still there.
‘It is our priority to check price-rise and will remain so’, he said.
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