Pune: The Reserve Bank of India’s (RBI) top priority is to bring the country back to its high-growth path, said RBI governor D. Subbarao at a function in Pune on Saturday.
Speaking on the sidelines of the sixth annual convocation programme of the National Institute of Bank Management (NIBM), the central bank’s governor said in order to bring back the country to its growth trajectory, the various stimulus packages from the government and the RBI need to work, credit flow in the system must increase, and exports should pick up.
However, he conceded that for exports to pick up, the global economic environment needs to improve first.
Subbarao said the fiscal stimulus packages have started working in fields like steel, cement, coal, passenger cars, cargo traffic and rail freight.
”We are seeing our own version of green shoots,” he said. However, in other sectors, the stimulus packages are yet to show their effect, he said without giving details of the sectors.
RBI’s expansionary policy also needs to be reversed, Subbarao said, adding that when and how it will be executed is yet to be decided but that it would be done at an appropriate time.
Since October, RBI has brought down its policy rate to 3.25% from 9% and through various monetary measures, has released an equivalent of Rs3.9 trillion in the economy.
“But certainly it’s (the reversal of expansionary policy) a part of the scheme,” he said.
Terming the negative inflation as a “cyclical feature,” Subbarao said that the prices of the food articles continue to remain substantially higher which is a very important consideration for a “country like India”.
“It is certainly important to see that food prices stay reasonable,” he said, adding that everybody should have access to adequate food.
India’s inflation rate for the week ended 6 June was a negative 1.61%. Nevertheless, RBI will revisit its growth and inflation target in the next quarterly policy in July, he said. RBI has projected the country’s inflation rate at 4% by the end of March.
“We will revisit growth and inflation in our July quarterly policy, Subbarao said.
Earlier in the day, the function’s chief guest, Suresh Tendulakar, chairman, Economic Advisory Council to the Prime Minister of India, said he expects India to maintain its 2008-09 growth rate in fiscal 2009-10 as well. India grew at 6.7% in fiscal 2008-09.