Does he consider being termed an “inflation warrior” a compliment or criticism,RBI Governor D Subbarao was asked today.
“I do not take that as a compliment,” reacted Subbarao during an interview.
But he went on to add that if people had said the Governor and the RBI had got the mix between growth and inflation judiciously and drawn a right balance “I would take it as a compliment”.
Subbarao said if people thought that he was an inflation warrior to imply that he was targeting inflation regardless of all other concerns,then that would be misreading of RBI’s policy calculations.
He said if inflation was close to double digit then RBI need to be inflation warriors. “People say that (tight monetary policy) is affecting growth. Possibly it is affecting
growth because you cannot bring down inflation without sacrificing some growth,” he said.
“But that sacrifice is only in the short term. In the medium term,low and steady inflation secures our growth. Only in such a situation,investors and consumer can make informed decision,” he added.
Justifying his priority to tackling inflation,the RBI chief said he had to listen to “silent voices” of millions of poor amid vociferous demand from several quarters for interest rate cut to boost sagging industrial production.
Subbarao said it was equally important to save the poor from the impact of high inflation which was nothing but “regressive tax.”
“There are hundreds of millions of people in the country who are affected by inflation,poor people. Inflation is regressive tax,it hurts poor people more than it hurts people like us. And we need to hear that silent voices,” he said while responding to a question on the rate cut demands of India Inc.
“RBI has to be a sensitive institution in drawing the balance between growth and inflation. We need to listen not only the voice that gets heard but also the voice that does not get heard,” he said.
Moreover,Subbarao explained it was also important to protect the savings of individual depositors from inflation.
The RBI chief said that it is not possible to rein in inflation without sacrificing growth.
Subbarao asserted that the central bank is sensitive to growth concerns but not at the cost of higher inflation.
Maintaining that it is comfortable with 5 per cent inflation,he said,RBI takes into account the growth-inflation balance and that is why there has been easing of
interest rate since January last year.
Admitting that the high Current Account Deficit (CAD) level is a matter of concern,he said there was need to boost exports and bring down dead-weight imports like gold.
Subbarao said there was need to bring inflation to 5 per cent saying the relationship between growth and inflation is non-linear.
“There is a threshold level of inflation. If inflation is above that level,it is inimical to growth. If inflation is below that level it is possible that you can bargain for
higher growth,tolerating a little higher inflation,” he said.
Subbarao maintained that RBI’s mandate is not just to target inflation like the Bank of England which does it at any cost.