Inflation would have been 13 percent, had RBI not acted: Subbarao
December 9th, 2011 - 6:22 pm ICT by IANSKolkata, Dec 9 (IANS) Reserve Bank of India (RBI) Governor D. Subbarao Friday defended the apex bank’s monetary tightening that has drawn criticism for its impact on economic growth, saying if the bank had not acted inflation would have soared to 12-13 percent.
“Of course, there is a view held by a large majority of people that the RBI has hiked rates 13 times since March 2010 and inflation is still high…and that is a legitimate concern. And I think (it is a) valid criticism,” Subbarao said at a Confederation of Indian Industry (CII) programme here.
“My response to that is if the Reserve Bank had not acted, the inflation perhaps would have been 12 percent or 13 percent. The fact is that it is 9.7 percent today,” he said.
Stating that he was sensitive towards 80 percent of the people in the country who were affected by high inflation, Subbarao said: “The poor are hurt most by inflation. So, the challenge for the Reserve Bank is to balance the concerns of corporate leaders and the problems of the very poor in this country.”
“That is the challenge of balancing growth and price stability,” he said.
Subbarao reiterated the RBI policy of not having a target exchange rate or a target band for the rupee and hoped that Indian companies were hedging their foreign-exchange exposure to guard against currency volatility.
“Corporates hedge their foreign exchange exposure, that is a good practice, good for maintaining stability of the economy and stability of the corporate sector.”
The rupee has declined around 16 percent against the US dollar in the last four months.
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