Outgoing Reserve Bank of India Governor Raghuram Rajan has warned policy makers not to drop their guard against inflation as, he said, there was no long trade-off between growth and inflation.
Speaking at foundation day lecture at the Tata Institute of Fundamental Research, the RBI Governor said, “We have gotten used to decades of moderate to high inflation, with industrialists and governments paying negative real interest rate and burden of the hidden inflation tax falling on the middle class saver and the poor.”
Last Saturday, Mr. Rajan wrote a mail to RBI employees saying he will not seek a second term after his present term expires on September 4,2016. The exit of the former IMF chief economist has fuelled speculation that the new Governor which the government will appoint will cut interest rate sharply.
“The central bank serves the economy and the cause of growth by keeping inflation low and stable,” he said. He said the new as well as the members of the yet-to-be-formed monetary policy committee should produce a low inflation future for India.
