Mumbai : Reserve Bank Governor Raghuram Rajan cemented his anti-inflationary stance saying price stability is the best insurance for high and sustainable growth, but assured a low interest rate regime if all goes well on the macro, inflation and the external fronts.
“The Reserve Bank will not hold interest rates high any longer than is necessary, and if disinflation proceeds as warranted, there will eventually be room to cut rates,” he said in the customary post-policy meet.
“There is a path we are trying to achieve, and we want to achieve that path (8 per cent CPI by next January and 6 per cent by January 2016). We are not against growth, but we do think that growth will be most benefited if we disinflate the economy,” Rajan said, adding that both these targets look achievable.
“This is an anti-inflation fight, and let us win it because that will create the best conditions for sustainable growth,” Rajan, who raised key rates twice since assuming office last September, added.
Stating that the country is no longer `a problem economy’, Rajan said the economy has emerged from the perception of being in crisis as it has placed itself as a better place to remain invested.
“I keep telling the international fora that India is not a problem any more. I think there was a perception problem (last year), but I think today that perception also doesn’t exist,” Rajan said.
Noting that political stability is the best tool for macro stability, he said the formation of a stable government at the Centre has strengthened the country’s position amongst overseas investors.
“Political stability to my mind is worth a tremendous amount as far as the external situation goes and that is big change,” the Governor said, and complemented the government’s resolve to keep a fiscal consolidation glide path.
When asked about the arrest of Syndicate Bank Chairman S K Jain for allegedly taking bribes, Rajan warned against painting every state-run banker as corrupt and against a witch hunt which will bring credit market to a halt. However, he admitted that such cases speak volumes about poor corporate governance at PSBs and underlined the need for improving transparency in sanction of loans. He also said the RBI has initiated inspection of the book of accounts of Syndicate Bank.