Low inflation must for meaningful interest rate regime: Urjit Patel

Observing that RBI has already notified inflation target of 4 per cent, Patel said the effort should be to achieve the objective of keeping prices under check on a durable basis, given the progress already made.

By: PTI | Gandhinagar | Published:January 11, 2017 6:05 pm
demonetisation, urjit patel, rbi, scrapped notes, cash crunch, cash crisis, rbi governor urjit patel, india news, latest news New Delhi: RBI Governor Urjit Patel 

RBI Governor Urjit Patel on Wednesday made a strong case for keeping inflation low on durable basis saying it is “essential prerequisite” for meaningful interest rate structure to increase investments for better growth. “For us, in India, good policy housekeeping should be the cornerstone. It is easy and quick to fritter away gains regarding macroeconomic stability. But hard and slow to regain them,” he said at Vibrant Gujarat Global Summit here.

Observing that RBI has already notified inflation target of 4 per cent, Patel said the effort should be to achieve the objective of keeping prices under check on a durable basis, given the progress already made. “Low and stable inflation is an essential prerequisite for having a meaningful interest rate structure or regime whereby decisions by savers and investors help to achieve maximal allocative efficiency in an economy whose investment rate has to increase for better growth outcomes,” he said.

“Concomitantly, we have to continue to press ahead for a more fluid, smooth transmission of monetary policy, as also enhance the formulaic linkage between changes in policy rates and other rates, including administered ones,” he emphasised.

Referring to the issue of fiscal deficit, Patel said it is necessary to contain it as combined borrowing of centre and states are among the highest in the G-20 countries. This is also coming in the way of credit rating upgrade by international agency.

Lower fiscal deficit will also help in better management of risk and curb financial volatility which becomes more important in view of adverse external environment, he said.

The RBI Governor also made a case for continuous support towards recapitalisation of public sector banks arguing that “a well capitalised domestic banking system enhances the comfort of the various stakeholders to conduct business in the offshore IFSC as well”.

GIFT has been set up by the Gujarat government as India’s first International Financial Services Centre (IFSC) that brings together world class infrastructure, connectivity, people and technology on a single platform for businesses across the world.

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  1. B
    Big b
    Jan 11, 2017 at 2:55 pm
    Bank will finance Ambani adani who don't return money anyway by keep on rotating loans
    Reply
  2. A
    Aseem
    Jan 11, 2017 at 6:28 pm
    ok this is Urjit Patel, it just can't be Modi talking sense..
    Reply
  3. A
    Ashutosh
    Jan 11, 2017 at 2:24 pm
    Good - But Banks are not lending liberally - till the fincence comes to the needy at low cost of capital - economic development will have to wait
    Reply
  4. P
    pppp
    Jan 11, 2017 at 1:54 pm
    let modi advice u wait for it.a very brilliant rbi governor.u gujarati spoiled our nation
    Reply
  5. I
    Intolerant Logic80
    Jan 11, 2017 at 2:23 pm
    So having a puppet PM is acceptable for 10 years. But rbi governor is a problem, a guju pm is also a problem
    Reply
  6. M
    mathimathi
    Jan 11, 2017 at 4:29 pm
    yeah vijay and lalit can get loans from UK.
    Reply
  7. M
    mathimathi
    Jan 11, 2017 at 12:55 pm
    this rbi chief Patel is a gujju fake model puppet of feku maharaj.
    Reply
  8. Y
    yesodharan
    Jan 11, 2017 at 1:41 pm
    A well capitalised domestic banking system enhances the comfort of the various stakeholders as they could borrow it and runaway from this country of ours.
    Reply
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