Reserve Bank of India (RBI) Deputy Governor Subir Gokarn said on Friday the tough monetary tightening stance had dented the country?s growth prospects.
In its last policy announcement, RBI stated it expected inflation to start moderating from December onwards. However, Gokarn cautioned that the government?s loose fiscal policy would have implications for inflation management. ?The fiscal correction needed after economic growth picked up momentum was perhaps slow in coming. This is a burden that does come in managing inflation,? he said, stressing the government should bridge this gap to stimulate investment and growth.
Referring to the muted corporate performance due to rising input cost, he said,?We are clearly in the slowdown mode, the global environment and higher input cost is dampening the industrial activity.?
Amid contradictory ratings by global agencies sending jitters to the markets, Gokarn said the Indian banking sector was not facing any stress, though state-owned lenders needed capital infusion. ?Overall, we don?t see any fundamental stress on the banking system. So we are nowhere close to the problem,? he added.