RBI can't be inflation targeter: Subbarao

Posted By: Staff
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RBI can't be inflation targeter: Subbarao
Mumbai, Feb 2 (PTI) The Reserve Bank today said that it can not work as inflation targeter, as it will not serve the best interest of macroeconomic management. "The Reserve Bank can't be an inflation targeter, or a core inflation targeter.

That will not serve the best interest of the macroeconomic management of the country," Governor Duvvuri Subbarao said at the two-day Second International Research Conference, organised by the Bank, here.

He also maintained that central bank, which hiked policy rates a record 13 times last year to tackle inflation, cannot pursue a policy completely oblivious to growth. Subbarao, however, said that in the past 60 years no government was insensitive to inflation, and inflation management usually takes precedence over growth concerns.

RBI had come under criticism in the last one-and-a-half years for aggressive monetary stance on inflation. But the Governor pointed out that without the complementary effort to overcome supply side constraints, monetary policy would not be effective to check the price rise.

"If supply side constraints affecting inflation are not managed, is it realistic to expect RBI to contain inflation?" Subbarao asked, and added that the central bank too was confused as to which index of inflation should be targeted as there are many indices.

About the rising government borrowing, Subbarao said it may not be possible for the monetary policy to remain "indifferent" to government borrowing programmes.

"In a country like ours where fiscal deficit is high and is likely to be high, no matter what we might wish, when the government borrowing is such a large part of the total credit outflow, can the central bank realistically remain indifferent to the government borrowing?"


Read more about: rbi, inflation, government
Story first published: Thursday, February 2, 2012, 17:30 [IST]
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