Move to help growth: RBI

In a speech in Chandigarh, he said, “It’s commendable as the government has taken the initiative. Let's hope that it will improve the logistics chain and supply chain management in agriculture.” On Thursday,  the Union cabinet approved 51 per cent foreign direct investment in the supermarket sector. In a related context, the RBI chief said inflation needs to be brought down to five per cent initially and then even lower, consistent with India’s integration with global economy.  The current inflation situation, according to Subbarao, is a consequence of both supply shocks and demand pressures.

“Raising agricultural production and productivity is, important for containing price pressures, raising rural incomes and making growth more inclusive,” Subbarao said.

Maintaining that the India growth story is “credible”,  Subbarao pointed out: “For a world that once believed that an elephant does not have any animal spirit, our march up the high growth trajectory proved that an elephant too can dance.” Subbarao maintained that there is a need to invest in rural infrastructure and the supply chain to build forward and backward linkages. “We also need to be mindful that land and water costs will only increase over time; and inclusive growth will push up wages thereby putting upward pressure on inflation.”