Time for RBI rethink: Basu

“The conventional policy of interest rates ... now you do have to rethink on that,” Chief Economic Advisor Kaushik Basu told reporters.

His comments come amid Indian corporates blaming the high interest rate regime for the decline in industrial output growth.

“The dilemma that we are facing and the RBI is facing (is that) there are two battles we have to fight — inflation and growth. It is a really hard balancing act that the RBI has to do,” Basu said.

The economic growth in the April-June period stood at 7.7 per cent, the lowest in six quarters. Driving at a correlation between the fiscal deficit target of 4.6 per cent of the GDP for 2011-12 and economic growth with inflation, he termed fiscal deficit as a “double edged sword”.

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