Brushing aside suggestions that the Reserve Bank of India had shifted its focus from inflation management to growth, the central bank, on Monday, said fighting rising prices would continue to be its priority, and a call on raising interest rates would be taken after factoring in more data.
“...nobody should doubt our desire to fight inflation, and our belief that interest rates are our main tool that we have. Nobody should doubt that,” RBI Governor Raghuram Rajan said when asked if the central bank was more keen to boost growth than to tame inflation.
He said the RBI would wait for the next set of data on inflation and industrial growth before taking a call on interest rates.
“We want to see data on how the work we have done so far is playing out, and then we will take the next step. Don’t judge me by whether I raise interest rates in every meeting,” he said in a TV interview. Dr. Rajan had increased the key interest rate twice by 0.25 percentage point each in successive monetary polices, but refrained from hiking it further at its December 18 mid-quarter monetary policy review despite high inflation. The repo rate is now 7.75 per cent.
Retail inflation climbed to a nine-month high of 11.24 per cent in November, while wholesale price inflation rose to a 14-month high of 7.52 per cent last month. The next policy review is scheduled on January 28. Dr. Rajan said: “Inflation targeting does not mean that you don’t keep an eye on growth because the level of growth in the economy tells you how much disinflation there is already in the system.”
He said while the RBI was targeting wholesale inflation at 5 per cent, it had yet to identify an appropriate level for inflation as measured by the Consumer Price Index.
The government will release the next set of data on inflation and industrial growth in January.
Meanwhile, Dr. Rajan said in the interview that gold smuggling into India would pick up if the import curbs continued for too long.
Earlier this year, the government and the central bank issued a series of curbs on imports of gold — the second-most expensive item on India's import bill — hoping to ease the pressure on the currency.
Measures included hiking import duties on gold to a record 10 per cent.
