St Gallen: Reserve Bank of India Governor Raghuram Rajan on Friday said that he — and not the government — was responsible for setting monetary policy, asserting his independence in taking a hawkish stance on inflation amid an election hinging on how to revive economic growth.

Should the BJP win, analysts say RBI Governor Raghuram Rajan could come under political pressure to retreat from his hawkish stance on inflation. Responding to this, Rajan said, “The government can fire me, but the government does not set monetary policy.”

“The key question is what kind of equation do you have with the government? I determine monetary policy, I say what it is,” Rajan said at a conference in St. Gallen in eastern Switzerland.

The RBI’s governor and his deputies are appointed by the government — but they generally enjoy latitude in policymaking. However, Rajan’s focus on inflation has also not been popular with the ruling Congress party.

Finance Minister P Chidambaram on Thursday reiterated his stance that monetary policy decisions must take into account both price stability and economic growth, although he called for any new government to respect Rajan’s appointment to the apex bank.

Rajan on Friday reiterated his stance that bringing down inflation was key to growth and that India could one day emulate more developed economies such as

S Korea, Japan, or China.

“To get sustainable growth, we have to bring down inflation. Once we get inflation down, then we can talk about the rest,” he said.

“I’m confident we can get back to the 8, 9 or 10 per cent growth even though we’re currently slowing down,” he added.

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