New Delhi: The Reserve Bank of India will adopt appropriate measures on boosting economic growth, governor D. Subbarao said on the day the nation’s inflation rate fell to the lowest on record, giving room for more rate cuts.
“We will take whatever action is necessary,” he said at industry lobby group Confederation of Indian Industry’s annual meeting in New Delhi on Thursday. The central bank is constantly monitoring the situation, Subbarao said, without elaborating.
Rate cuts? Reserve Bank of Indian governor D. Subbarao. Abhijit Bhatlekar / Mint
India’s inflation slowed to 0.27%, the government said, allowing space for interest-rate cuts to bolster an economy growing at the weakest pace in six years. Inflation is the slowest on record, according to Bloomberg data available since 1990. Economists expected an increase of 0.12%.
India’s economic recovery will be swift and sharp, aided by savings and productivity, Subbarao said, without giving a timeline. Growth fundamentals are intact, while local banks are sound and well-capitalized, he said. A decline in crude oil prices provides space for the government to spend, he said.
The government’s borrowings have risen because of the need to pay for economic stimulus plans, he said. Next year’s borrowing programme will be conducted by the central bank in a manner that causes the least disruption, he said.
Terming the business environment in the coming fiscal starting 1 April as challenging, Subbarao dismissed concerns that India is slipping into a period of deflation.