“We have cut the repo rate by 150 basis points to 6.5 per cent due to reduction in inflation,” he said.
Former RBI governor Raghuram Rajan on Monday said the central bank will have to raise interest rates to check inflation and politicians and bureaucrats should not consider the hike as some “anti-national” activity.
Known for his outspoken views, Rajan also said that it is important to remember that the “war on inflation” is never-ending.
“Inflation is on the rise in India. At some point, the RBI will have to raise rates, as is the rest of the world,” he said in a LinkedIn post.
Expensive food items pushed retail inflation to a 17-month high of 6.95 per cent in March, above the RBI’s upper tolerance level, while wholesale price-based inflation hit a four-month peak of 14.55 per cent, mainly due to inflation. To tighten crude oil and commodity prices.
“… the politicians and bureaucrats have to understand that the increase in policy rates is not an anti-national activity to benefit foreign investors, but an investment in economic stability, the biggest beneficiary of which is the Indian state,” he emphasized.
Rajan is currently a professor at the University of Chicago Booth School of Business. Earlier this month, the Reserve Bank of India (RBI) kept borrowing costs unchanged at a record low for the 11th time in a row, to continue to support economic growth despite rising inflation.
While the RBI has raised the retail inflation estimate for the current fiscal to 5.7 per cent from the earlier estimate of 4.5 per cent, the benchmark interest rate was retained at 4 per cent.
Addressing criticism that high rates stifled the economy during his tenure, Rajan said he became RBI governor in September 2013 with a three-year term, when India became a full-fledged currency with the rupee in a free fall. There was a crisis.
“Inflation was at 9.5 per cent, RBI increased the repo rate to 8 per cent from 7.25 per cent in September 2013 to contain inflation.
“We have cut the repo rate by 150 basis points to 6.5 per cent due to reduction in inflation,” he said.
The eminent economist said: “We also signed an inflation targeting framework with the government.”
Noting that these actions not only helped stabilize the economy and the rupee, he said between August 2013 and August 2016, “inflation dropped from 9.5 per cent to 5.3 per cent.”
Foreign reserves have crossed $600 billion, Rajan said today, allowing the RBI to calm the financial markets even as oil prices have climbed.
He said, “Remember that the crisis in 1990-91, when we had to approach the IMF, stemmed from high oil prices. RBI’s strong economic management has helped ensure that this did not happen this time.” “
Admitting that no one is happy when interest rates are to be hiked, Rajan said he still receives brickbats from politically motivated critics, who allege that the RBI has slowed the economy during his tenure. was stopped.
Noting that some of his predecessors were similarly criticized, he insisted: “It is imperative that the RBI does what it needs to do, and broader politics gives it the latitude to do so.”
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