Ready to revisit inflation target: RBI guv

Tags: News

Normal inflation post-crisis will be higher than pre-crisis, says Subbarao

RBI governor Duvvuri Subbarao has said the Reserve Bank is ready to revisit the ideal inflation target of 4-5 per cent, which many feel is too low to attain given the current scenario.

“I am not saying that we would definitely change the number, but we will certainly revisit our strategy,” Subbarao said during a panel discussion on the occasion of the silver jubilee celebrations of the RBI-promoted Indira Gandhi Institute of Development Research.

At a panel discussion on the ‘Country’s economic prospects,’ Subbarao was prodded by his predecessor Y V Reddy to have a relook at the 4-5 per cent inflation level, which RBI had set before the crisis and is still holding on to as the ideal price level.

According to Reddy, a lot has changed on multiple fronts like the integration of the domestic economy with the global economy and the rising government borrowing, which has resulted in inflation being consistently at high levels.

The comment comes in the wake of a decadal low in GDP growth at 5.3 per cent in the second quarter of this financial year and shrill calls from the government and industry for a benign monetary policy regime to prop the fragile economy.

The RBI will announce the mid-quarter review of the monetary policy on December 18. At the last policy, though he did not cut interest rates, Subbarao had hinted at a rate cut in the January policy.

It can be noted that despite 13 successive rate hikes between March 2010 and October 2011, inflation has been treading close to double-digits, with the sole exception of a few months in 2009 when it had fallen into the negative territory.

“You (Reddy) have been prophetic on many things, perhaps you will be prophetic on this also. Normal inflation post-crisis will be higher than pre-crisis,” Subbarao said.

The ideal inflation target of 4-5 per cent has consistently found a mention in the quarterly monetary policy announcements, even as the headline inflation breached the double-digit mark.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • The sudden rush of new papers could unsettle the secondary market

    While questions are being raised if the party has somewhat overextended on the Street, given the not-too-comforting macroeconomic numbers, retail inve

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Arun Kumar Jain

Why manufacturing needs innovation

Prime minister Narendra Modi’s call of “come — make in ...

Kuruvilla Pandikattu SJ

Warren Buffett’s key to happiness

Despite being the second richest American, Warren Buffett still lives ...

Gautam Gupta

In fashion, why quality must exceed quantity

Every time there’s a fashion week in India, my friends, ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture