Ahead of its mid-quarter monetary policy review on March-19, The Reserve
Bank of India (RBI) Governor D Subbarao underscored India's growth
potential even if the current GDP growth hit 15-quarter low of 4.5%.
However, he cautioned on the high rate of inflation, which still remains
above the central bank's comfort level of 4-6%."The India growth story is still credible and the long term growth drivers are still intact," Subbarao said in his speech delivered at London School of Economics on India's macroeconomic challenges.
"If we do the right things, we can get back on a high growth trajectory. We can accelerate growth and improve welfare only if we effectively implement wide ranging economic and governance reforms. Slipping up on this will amount to a costly and potentially irreversible squandering away of opportunities."
He further stressed that government needs to lead the process of economic revival while admitting that RBI too has a key role to play.
Inflation
India's headline wholesale price index inflation had been above 7 percent from 2009 until January, when it fell to 6.62 percent from 7.18 percent in. The WPI inflation data for February is due on Thursday and is expected to have eased further to 6.54 percent, according to a Reuters poll.
Subbarao said that both demand and supply side factors has pushed India’s inflation to uncomfortable levels. Food inflation had been the key driver from the supply side. Food inflation is still the worrying trend as it remained high in January. Inflation on food articles rose to 11.88% in January 2013 from 11.16% in December 2012.
Also read: Core banking must for co-op banks by Dec 31: RBI
Despite the high inflation many in industry believe that the central bank would cut repo rate by 25 bps in the upcoming monetary policy owing to moderation of growth.
Ahead of its mid-quarter monetary policy review on March-19, The Reserve Bank of India (RBI) Governor D Subbarao underscored India's growth potential even if the current GDP growth hit 15-quarter low of 4.5%. However, he cautioned on the high rate of inflation, which still remains above the central bank's comfort level of 4-6%.
"The India growth story is still credible and the long term growth drivers are still intact," Subbarao said in his speech delivered at London School of Economics on India's macroeconomic challenges.
"If we do the right things, we can get back on a high growth trajectory. We can accelerate growth and improve welfare only if we effectively implement wide ranging economic and governance reforms. Slipping up on this will amount to a costly and potentially irreversible squandering away of opportunities."
He further stressed that government needs to lead the process of economic revival while admitting that RBI too has a key role to play.
Inflation
India's headline wholesale price index inflation had been above 7 percent from 2009 until January, when it fell to 6.62 percent from 7.18 percent in. The WPI inflation data for February is due on Thursday and is expected to have eased further to 6.54 percent, according to a Reuters poll.
Subbarao said that both demand and supply side factors has pushed India’s inflation to uncomfortable levels. Food inflation had been the key driver from the supply side. Food inflation is still the worrying trend as it remained high in January. Inflation on food articles rose to 11.88% in January 2013 from 11.16% in December 2012.
Also read: Core banking must for co-op banks by Dec 31: RBI
Despite the high inflation many in industry believe that the central bank would cut repo rate by 25 bps in the upcoming monetary policy owing to moderation of growth.
AMIT KUMAR SINGH
PGDM 2ND sem
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