Inflation cannot be controlled without sacrificing growth, says D. Subba Rao

Reserve Bank of India Governor, Duvvuri Subba Rao on Tuesday said that inflation could not be controlled without sacrificing growth and stressed that the Central Bank must be sensitive to the silent voice of millions of poor while deciding on interest rates.

Delivering a memorial lecture on “Reserve Bank of India—making a difference in everyday life” organised to mark the fifth death anniversary of former IAS officer, K. Obayya, he referred to the demand of corporates to reduce high interest rates and to the criticism that RBI's tightening did not reduce inflation but ended up stifling growth.

He pointed out that short-term sacrifice of growth was some price to pay for bringing inflation down so that in medium term the growth was secure.

Financial crisis

Dr. Subba Rao said that a repeat of the 1991-type of financial crisis was highly improbable although the fiscal deficit was similar to that period and current account deficit likely to be higher.

The economy was much larger and different today and the exchange rate was market driven.

The country's financial markets were resilient, robust and more sophisticated now.

In a bid to tackle the problem of fake currency, he said the RBI was setting another plant in Mysore to make security paper for printing currency. He said that arresting Rupee's depreciation was also not so straight-forward as RBI would have to sell dollars.

Dr. Subba Rao and several other IAS officers, including former Chief Secretary K. Madhava Rao and T.L. Shankar paid glowing tributes to Obayya.