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Not comfortable with high inflation: Raghuram Rajan

By Religare

Not comfortable with high inflation: Raghuram Rajan
The central bank is not comfortable with inflation and would carefully calibrate its monetary policy, said the Reserve Bank of India Governor Raghuram Rajan.

"We have just got the IIP and CPI data. The WPI (wholesale price index) data is due next week. After taking an overall view of the data, we will carefully calibrate the monetary policy," Rajan told reporters after the RBI's central board meeting.

According to the report, Rajan said that the economic growth was weak and inflation was high, which was a cause for concern. Both monetary and fiscal policies were essential to tackle inflationary pressures.

Regarding the fiscal policy, Rajan said the Finance Minister had laid down a road map that is expected to keep the fiscal situation under control. The government's fiscal deficit target is 4.8 per cent of GDP in this financial year. Aligning diesel prices with international rates would definitely control the fiscal deficit, the Governor said.

"In the short term, hiking diesel prices will have an inflationary impact. But in the long run, this will lead to deficit reduction," he observed.

Vegetable prices rose 61.6 per cent in November from a year earlier. Fruit prices rose 15 per cent. "The present system of delivery is high-cost, inefficient and lends to cartelisation. In this context, there is a need to look into the APMC (Agriculture Produce Marketing Committee) Act. "RBI is not comfortable with the current level of inflation," Rajan said.

Dion Global Solutions Ltd.

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