RBI's focus is to bring down inflation: Raghuram Rajan

Feb 24 2014, 20:15 IST
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If investors have a sense that inflation rate is going to come down they would be more prepared to take a bet on the Indian rupee, says Raghuram Rajan. Reuters If investors have a sense that inflation rate is going to come down they would be more prepared to take a bet on the Indian rupee, says Raghuram Rajan. Reuters
SummaryIf investors feel inflation will fall, they would be more prepared to bet on rupee: Raghuram Rajan

Reserve Bank of India Governor Raghuram Rajan today said the central bank's focus is to bring down inflation to boost investor confidence.

Rajan also expressed hope that a stable government after the Lok Sabha elections will continue the broad fiscal policies of the current regime and India may finally get the Goods and Services Tax (GST), an ambitious indirect tax reform measure.

"My belief is that we should be focused on getting our fundamentals right and that has been our focus ever since the summer of last year. One of the main aspects of our fundamentals is the inflation rate.

"If investors have a sense that inflation rate is going to come down, both domestic and international investors, they would be more prepared to take a bet on the rupee and that is essentially what we are focused on," Rajan said in an interview to CNBC.

After the US Federal Reserve indicated in May last year that it would taper its monetary stimulus, the rupee depreciated to a record low of 68.85 against the dollar on August 28. The Fed started gradual withdrawal of its monthly bond-buying programme in January.

Both the government and the RBI took steps to check the slide of the rupee, which has recovered and closed today at 62.07 against the dollar.

On policy expectations after the general elections, Rajan said it would depend on which government comes in.

"Even within the Congress, if a new United Progressive Alliance comes in, it could be quite different from the current government with a generational change. The jury is out on how it will change.

"My sense is if there is a stable coalition in power post-elections, no matter which persuasion it is, broad policies will continue," the Governor said.

He said that "there may be a difference in details but they are all" for passing the GST and for a number of actions, which the current government is taking.

The Governor said after the election, "hopefully, on some of the areas where we need to make changes, we will move forward."

He said all parties had agreed on GST but it could not be done before the elections.

"So post-elections, hopefully, that will happen," he said.

To a query on bad loans of banks, Rajan said their non-performing assets need to be brought down.

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