India’s 6.5 per cent growth rate is not good enough because the country needs to grow annually at a rate of 10 per cent for fifteen years, Reserve Bank of India Governor D Subbarao said.
Expressing discontentment on India’s slow growth rate, Subbarao said that India’s options against economic crisis were now less than what they were in 2008.
Delivering a speech at Cornell University of Ithaca, New York, he stressed that the central bank needed to slash inflation because it hurts poor people the most. The benchmark wholesale-price index jumped 6.87 per cent in July this year as compared with the corresponding period of last year.
Speaking on the topic, he said, “We need to bring it down to more acceptable levels of 5 percent or even less than 5 percent.”
Investor disappointment has added to a 4.7 per cent decline in the value of rupee against the dollar this year. Indian rupee remained the second-biggest loser among Asian currencies, after Indonesia’s rupiah. The decline in rupee has contributed to inflation pressures, causing rate of inflation to average more than 7 per cent this year.
However, he admitted that it would not be easy to control inflation through increase in interest rates because any increase in interest rates would also hurt growth. He said the central bank would have to determine how to adjust interest rates.
The intense price pressures, aggravated by sliding rupee and infrastructure bottlenecks, have so far prevented the central bank from cutting interest rate since April even as India – the third-largest economy in Asia – has been suffering sluggish pace of growth for the past many months. The rate-setting committee of the RBI is scheduled to meet on September 17.
- Oil firms falls as government considers export parity pricing model
- Essar Oil to sign $1 billion financing co-operation deal with CDB
- ONGC may sell stakes in deep-water blocks to Shell
- Huge scope for improving Indian shale gas estimates: ONGC
- HPCL Visakha refinery suffers major fire due to short circuit