Mumbai: The Reserve Bank of India (RBI) is not “obsessed” with inflation but is “committed” to inflation control because its “cares for growth”, governor D. Subbarao said on Saturday.
Subbarao was speaking at an event in Delhi to release the fourth volume of RBI’s history by Prime Minister Manmohan Singh.
“The Reserve Bank is committed to inflation control, not because it does not care for growth, but because it does care for growth. There is any amount of evidence to show that an environment of low and stable inflation is a necessary precondition for sustainable growth,” Subbarao said in his welcome remarks put up on the central bank’s website on Saturday.
Subbarao, who is set to end his five-year stint as head of the Indian central bank next month, acknowledged that both governments and central banks struggle to find the right balance between growth and inflation.
“In my view, this debate has been clouded by some oversimplifications. One such oversimplification is to say that governments are for growth and central banks are for price stability... To contend that the Reserve Bank is obsessed with inflation, oblivious to growth concerns, I think, is both inaccurate and unfair,” Subbarao said.
The outgoing governor also set out the challenges in front of his successor Raghuram Rajan, who has already joined the RBI as the officer on special duty before taking over as governor on 5 September.
“The challenge for you, governor Rajan, will be how you will use your formidable intellect, scholarship and global experience to shape the Reserve Bank as a knowledge institution that will set standards for how an emerging economy central bank should manage macroeconomic policy in a globalizing world,” Subbarao said in what is considered one of his last speeches before relinquishing office on 4 September.