High inflation 8216;the new norm8217;: RBI

8220;Despite significant actions on policy rates and liquidity by the Reserve Bank of India,inflation remains high,giving rise to some very fundamental questions,8221; RBI Deputy Governor Subir Gokarn said.

8220;This higher rate of inflation previously believed to be unacceptable is now the new norm,8221; Gokarn said.

Gokarn said high growth 8212; the economy is expected to have expanded by 8.6 per cent in the year that ended in March 8212; was contributing to high inflation.

8220;India8217;s central bank cannot afford to be slack on inflation,8221; Gokarn said after his speech. 8220;Restraint now for growth later is the tradeoff that needs to be kept in mind8221;.

The benchmark five-year overnight indexed swap rate rose 7 basis points to 8 per cent from the day8217;s low while the one-year rate climbed 8 basis points to 7.44 per cent after the statements from Gokarn were perceived to be hawkish. They had closed at 7.96 per cent and 7.39 per cent respectively on Thursday.

Inflation across Asia has been on the rise as central banks appear willing to tolerate rising prices as a side effect of rapid growth.

While India8217;s longer-term prospects remain bright,at least four major banks have cut growth forecasts in recent weeks for India in the year that started in April.

The latest cut came on Monday from Credit Suisse,which lowered its 2011/12 growth estimate to 7.5 per cent from 7.7 per cent while raising its average wholesale price index inflation projection to 7.6 per cent from 7.0 per cent for the year.