The comments by P. Chidambaram came after a central bank panel last month recommended making managing inflation its main policy objective, with a goal to explicitly target consumer price inflation of 4%, with a 2% band on either side.
Opinion polls ahead of upcoming national elections expected between April and May predict voters will oust P. Chidambarams Congress-led ruling alliance, in part over its failure to tame high food prices and revive economic growth.
RBI governor Raghuram Rajan has maintained in recent public comments that keeping inflation under control is necessary to promote growth and rejected views of a trade-off between the two. The central bank has raised interest rates by three-quarters of a percentage point since September.
In a developing country, this government believes, there must be a balance between price stability and growth, P. Chidambaram said in an interview with a news channel. That is a correct policy for a developing country, and a monetary authority must abide by the governments policy.
India has been caught in what some analysts say is a stagflationary environment of high inflation but low growth. The RBI has so far made inflation the priority although it is expected to leave interest rates on hold at its next policy review on April 1 after data last week showed retail inflation slowing to a two-year low in January.
The government and the RBI have often been at odds in fighting inflation. While the central bank has often blamed Centres expansive fiscal policy and failure to ease infrastructure bottlenecks for persistently high inflation, a growth-obsessed government, at times, has found it hard to digest interest rate hikes.
Besides inflation, the RBI also has two other main objectives, economic growth and financial stability. But taming prices is seen as having risen in priority after the RBI panel headed by deputy governor Urjit Patel recommended last month targeting consumer inflation. Chidambaram said the government would discuss the panel recommendations with the RBI.