‘Early to talk of a turnaround, but numbers point to it’
In a free-wheeling conversation after tabling of the Economic Survey 2012, Rajan said that current conditions should be taken as an opportunity to make the economy more competitive for faster and stronger growth. Excerpts:
Why do you think the gap between wholesale price and retail inflation is widening?
The CPI inflation gives a much greater weightage to food than WPI inflation. So with food inflation increasing at over 13 per cent, retail inflation will naturally reflect a high level of inflation. Also, food inflation hasn’t been coming down while other types of inflation have been declining. So the gap is widening. The RBI cannot control food inflation directly but it can’t even ignore it. So it has been doing a balancing act.
What is your expectation from the monetary policy review on March 19?
The RBI will do what it thinks is appropriate. They have said repeatedly that they have multiple objectives and they will work on it. Inflation control has been the primary objective and growth is related but not a secondary objective.
What are the measures that can help reduce the current account deficit (CAD)?
In the short run, the CAD is a consequence of a fairly difficult export environment. Also many of our imports are hard to curb and essential such as oil, coal and edible oil. Lastly, there are gold imports that have picked up quite substantially.
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