Press Esc to close
Sunday 19 April 2015
News updated at 9:52 AM IST
Weather
Max: 33.4°C
Min : 21.6°C
In Bengaluru
Sunny day

Rising inflation, high deficit to keep pressure on rupee

New Delhi, Nov 21, 2012, DHNS :

High interest rate alone has not dented growth

RBI Deputy Governor K C Chakrabarty

On a day when the rupee tumbled to a two-and-a-half month low of 55.12 to a dollar, the Reserve Bank of India (RBI) on Wednesday renewed its concerns about high inflation, swelling fiscal and current account deficits, saying the Indian currency cannot gain in strength as long as these factors remain.

“Inflation is high, fiscal deficit is high, current deficit is high. How can you expect the rupee also to be high,” RBI Deputy Governor K C Chakrabarty said.

The rupee had last settled at 53.43 on September 13, 2012.

Market experts said a high trade deficit and crude demand soaring to $7,25,000 per day  on average is putting pressure on the rupee.

India’s trade deficit widened to a record $20.9 billion in October, a big concern, given the country is already suffering from a wide current account deficit.

Oil firms, the largest buyers of dollars in the domestic currency market, were spotted buying the greenback persistently this week, traders said.

The Deputy Governor, however, said that there could be new normal for India’s inflation going further.

“If our economy is getting integrated with the global economy, , our inflation cannot be much different from that,” Chakrabarty said.

The RBI has all along maintained a comfort zone between 5-6 per cent for inflation.

Against rising hopes, various industry players demanding  reduction of interest rate, the deputy governor said the RBI will be very cautious in reducing the interest rates, as low interest rates should not result in collapse of the financial sector.

He said core inflation must be reduced to 1 per cent, which will reduce the cost of borrowings and expand the manufacturing sector.

Core inflation or inflation for manufactured products excluding food items, eased to 5.2 per cent in October from 5.6 per cent in September.

Further, dismissing the argument that high interest rates are responsible for slowdown in economic growth, he said high inflation has resulted in moderation of economic growth.

 “What we are trying to say is that the interest rate is not the only reason for the slowdown in growth. But inflation is definitely a reason for slowing down the growth,” he told reporters on the sidelines of the Assocham Banking Summit.

Chakrabarty said the economy slowing down is due to a   variety of reasons.

“Yes, to the extent monetary policy is not able to control inflation and not effective. It is responsible. We cannot say that something wrong is happening in the economy, we are not responsible. Collectively, we are all responsible,” he added.


Go to Top

Photo Gallery
Guru Sai Dutt of PSPB and Neha Pandit of Airport Athority Of India won the men and women title...

Guru Sai Dutt of PSPB and Neha Pandit of Airport Athority Of India won the men and women title...

Tibetan Spiritual Leader Dalai lama and Archbishop and Nobel Laureate Desmond Tutu...

Tibetan Spiritual Leader Dalai lama and Archbishop and Nobel Laureate Desmond Tutu...

Nuns of Missionaries of Charity wait in a queue to cast their vote infront of a polling centre...

Nuns of Missionaries of Charity wait in a queue to cast their vote infront of a polling centre...

A langur eats potatoes being sold by a roadside vendor in Ahmadabad...

A langur eats potatoes being sold by a roadside vendor in Ahmadabad...

Leopard seen in new glass enclosure at Sri Chamarajendra Zoological Garden in Mysuru...

Leopard seen in new glass enclosure at Sri Chamarajendra Zoological Garden in Mysuru...

KSRTC buses standstill due to the 'bundh' called by the Kannada Okkuta...

KSRTC buses standstill due to the 'bundh' called by the Kannada Okkuta...

Karanaji Lake in Mysuru...

Karanaji Lake in Mysuru...

A little boy of a migratory family walks freely at BMTC bus stand...

A little boy of a migratory family walks freely at BMTC bus stand...

.A tourist drinks water on the roadside during a visit to Jantar Mantar...

.A tourist drinks water on the roadside during a visit to Jantar Mantar...

Various kinds of articles attracting the viewers exhibited during Rajasthani Mela...

Various kinds of articles attracting the viewers exhibited during Rajasthani Mela...

Copyright 2014, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bengaluru - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523