RBI should focus on growth, not inflation, say banks

The Reserve Bank should cut interest rate in its forthcoming monetary policy review to check India’s growth from slipping below 5 per cent, top private bankers Aditya Puri of HDFC Bank and Shikha Sharma of Axis Bank have said.

“RBI could give a signal because you don’t want growth to come below 5 per cent,” Puri, who is Managing Director of HDFC Bank, said at a banking awards function in Mumbai on Wednesday.

Attributing the spike in September inflation, which many feel will hold back RBI from cutting rates, to diesel price hike, Puri said, “Yes, inflation has been high, but about 30 basis points is (due to) the fuel price increase, so (the actual number) is about 7.5 per cent. I am hoping for the best.”

Sharma, who is Managing Director and Chief Executive of Axis Bank, said that after the fiscal reforms, which have a bearing on fiscal consolidation, the time has come for RBI to shift its focus towards growth now.

“While monetary policy needs to focus both on inflation and growth, given the recent fiscal measures, which are hopefully going take us towards a better situation on fiscal consolidation, I think the leaning of policy right now needs to be on growth,” she said. “We just can’t afford to have growth being stopped below 5 per cent. Therefore, I would see CRR cut by 50 basis points,” she added.

RBI Governor D Subbarao will unveil the second quarter monetary policy on October 30. Wholesale inflation in September rose to 7.81 per cent, a 10-month high, from 7.55 per cent in the previous month.

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