Inflation fight to hit growth: RBI
While moderate inflation is essential for economic expansion, some short-term sacrifice in growth is inevitable for the sake of bringing stability on the price front, according to RBI Governor D Subbarao.
“We need to bring inflation down to secure sustainable growth in the medium term. Some short-term sacrifice of growth is an inevitable cost to pay for price stability in a supply constrained economy,” Subbarao said while speaking at the National Convention on Leadership at the CII-Suresh Neotia Centre of Excellence for Leadership in Kolkata last month. The edited transcript of the RBI Governor’s speech was released by the central bank on its official website.
“We have to manage the balance between price stability and growth. In order to combat inflation, RBI has had to gradually and continuously tighten monetary policy,” he said.
“This has led to criticism, especially from industry and business sections, that higher interest rates engendered by our policy have curtailed growth. This grievance is legitimate, and to some extent, understandable,” he added.
However, he said the central banks will also have to be sensitive to the ‘voices of the poor’ about the burden of surging prices. The RBI has been following a tight monetary policy for the past two years to tame inflation.
