Low growth will be factored in monetary policies: RBI chief

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RBI Governor D Subbarao. RBI Governor D Subbarao.
SummarySubbarao said that at the same time, inflation is still high.

RBI Governor D Subbarao said there was a steep moderation in growth, which the apex bank would take it into account in its mid-quarter and quarterly policies.

"Growth has moderated certainly. Growth has come down from 8.5 per cent and 6.5 per cent in the last two years to 5.5 per cent and 5.3 per cent (in the last two quarters)," Subbarao told reporters after the RBI's central board meeting here.

He said: "We in the RBI are always trying to manage the balance between growth and inflation. The fall in growth to 5.3 per cent in the last quarter is a steep moderation."

Subbarao said that at the same time, inflation is still high.

"Inflation has come down from its peak. At 7.5 per cent, inflation is still high. We are expecting that inflation will trend down in the last quarter of the current fiscal," he said.

"And, as we go into our mid-quarter policy on December 18 and quarterly policy on January 29, we will take into account the growth-inflation trajectory and calibrate our policy accordingly," the RBI governor said.

Commenting on his latest statement that RBI would revisit the inflation figures, Subbarao said in a panel discussion with two former governors, Y V Reddy and C Rangarajan, the former had opined that the target of inflation should be raised.

He said C Rangarajan, on the other hand, felt that RBI should stick to the inflation target.

"What I mean by target is not a hard and binding one, but one we aim at five per cent," he said. Subbarao said he mentioned after listening to both the speakers that RBI would review what they had said internally.

"Within the RBI we will see if we need to change our strategy, the inflation target for short term. However, there is no commitment that we are actually going to change it," he clarified.

Replying to a query, he said that government's policy to provide direct cash transfers would have no impact on inflation.

When asked about financing the current account deficit (CAD), Subbarao said: "It will not be a problem. We have our internal assessment of CAD but that cannot be made public".

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