Ruling out the suggestion of corporate houses to fill up the gap of fiscal deficit through monetization, Duvvuri Subbarao, the governor of Reserve Bank of India (RBI) said, “It will bring the inflation in long term.”
‘We should not see only for the next three months but also for the next three years,’ said Subbarao while responding the query of India Inc. at a seminar organised by Federation of Indian Chambers of Commerce and Industry (FICCI) in New Delhi on Monday.
Printing currency is not the benign solutions; it can fulfill the short-term requirements only but in long term it would cost sternly, said Subbarao by adding that printing currency must be backed by the real resources and those can only come from two sources: rising taxation or rising inflation.
‘We would look for alternative option’, he further said probably indicating to borrowing more from the market.
Stressing on the steep moderation in country’s growth, the RBI governor said that his prime focus was to arrest the moderation because Indian banks are still strong and there is no wealth erosion in the system. But India is not an island and the effect of global economic crisis has also affected the economic condition of the country.
He, however, expressed hope that India would recover swiftly and sharply than any other countries in the world.
The cooling of inflation is also a positive point for India and it provides enough room for RBI to take some measurable steps in near future, he said but also added RBI’s monetary policy action was not based on only wholesale Price Index (WPI) but also on Consumer Prices Index (CPI), Gross Domestic Product (GDP) deflator and inflation expectations from professionals.
Responding over the query: ‘Despite several rounds of cut made by RBI, the banks were not cutting the rates?’ Subbarao said this was due to weak transmission of monetary policy.’ He assured that he would do all possible efforts to make it effective.
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