RBI governor Raghuram Rajan. Photo: Ramesh Pathania/Mint
An RBI panel last month proposed introduction of
inflation targeting into monetary policy, with the specific aim of a
consumer price index (CPI) of 4%, with a 2% band on either side. The RBI
has raised interest rates by three-quarters of a percentage point since
September to bring down consumer inflation, which fell to 8.79% last
month from double digits in November, even as the government has
traditionally preferred to focus on bolstering growth.
“It’s not as if the government is on a different page on
what we’ve been doing on inflation thus far. They may have different
views on what they would like to see done, but there is a process, there
is a conversation,” Rajan said in an interview with CNBC, broadcast by Indian channel CNBC-TV 18 on Monday.
The government and RBI have often been at odds in fighting inflation.
While the central bank has often blamed the government’s
expansive fiscal policy and failure to ease infrastructure bottlenecks
for high inflation, a growth-obsessed government, at times, has found it
hard to digest interest rate increases.
RBI is not technically independent—the governor and his
deputies are appointed by the government—although it generally enjoys
latitude in policy-making. Rajan said the central bank panel’s report on
inflation was consistent with the government’s stance. “We have a
committee which has suggested a target, which is also by the way,
consistent with the process finance ministry’s committee has suggested,
so there is no disagreement about broader need to get a framework in
place,” he said.
“I think in terms of how I see the process, is really
that the government sets the objective, and the central bank delivers on
that objective,” Rajan said.
Rajan also reiterated his call for the Federal Reserve to
take into account the impact of its withdrawal of monetary stimulus on
emerging economies, despite saying he was comfortable with the current
pace of tapering.
“I actually welcome a measured pace of tapering. The only
thing I have been calling for is that in the communication there should
be some sensitivity to conditions in emerging markets,” Rajan told CNBC.
“And this is not from our perspective, this is broadly
emerging markets, some of whom have been in trouble in the last few
months. But I am fully prepared for a tapering that continues at this
measured pace.”
RBI governor Raghuram Rajan. Photo: Ramesh Pathania/Mint
Mumbai: Reserve Bank of India (RBI) governor
Raghuram Rajan
said government and the central bank shared similar views on inflation
management, while reiterating a call for the US Federal Reserve to be
more sensitive to emerging economies regarding tapering of its stimulus
programme.
Rajan’s comments, in an interview with
CNBC, come after finance minister
P. Chidambaram
last week chided the central bank over its focus on fighting inflation,
saying the RBI needed to abide by government policy to promote economic
growth.
An RBI panel last month proposed introduction of
inflation targeting into monetary policy, with the specific aim of a
consumer price index (CPI) of 4%, with a 2% band on either side. The RBI
has raised interest rates by three-quarters of a percentage point since
September to bring down consumer inflation, which fell to 8.79% last
month from double digits in November, even as the government has
traditionally preferred to focus on bolstering growth.
“It’s not as if the government is on a different page on
what we’ve been doing on inflation thus far. They may have different
views on what they would like to see done, but there is a process, there
is a conversation,” Rajan said in an interview with CNBC, broadcast by Indian channel CNBC-TV 18 on Monday.
“I think there is fair amount of coordination at the highest level.”
The government and RBI have often been at odds in fighting inflation.
While the central bank has often blamed the government’s
expansive fiscal policy and failure to ease infrastructure bottlenecks
for high inflation, a growth-obsessed government, at times, has found it
hard to digest interest rate increases.
‘No disagreement’
RBI is not technically independent—the governor and his
deputies are appointed by the government—although it generally enjoys
latitude in policy-making. Rajan said the central bank panel’s report on
inflation was consistent with the government’s stance. “We have a
committee which has suggested a target, which is also by the way,
consistent with the process finance ministry’s committee has suggested,
so there is no disagreement about broader need to get a framework in
place,” he said.
“I think in terms of how I see the process, is really
that the government sets the objective, and the central bank delivers on
that objective,” Rajan said.
Rajan also reiterated his call for the Federal Reserve to
take into account the impact of its withdrawal of monetary stimulus on
emerging economies, despite saying he was comfortable with the current
pace of tapering.
“I actually welcome a measured pace of tapering. The only
thing I have been calling for is that in the communication there should
be some sensitivity to conditions in emerging markets,” Rajan told CNBC.
“And this is not from our perspective, this is broadly
emerging markets, some of whom have been in trouble in the last few
months. But I am fully prepared for a tapering that continues at this
measured pace.”
RBI governor Raghuram Rajan. Photo: Ramesh Pathania/Mint
Mumbai: Reserve Bank of India (RBI) governor
Raghuram Rajan
said government and the central bank shared similar views on inflation
management, while reiterating a call for the US Federal Reserve to be
more sensitive to emerging economies regarding tapering of its stimulus
programme.
Rajan’s comments, in an interview with
CNBC, come after finance minister
P. Chidambaram
last week chided the central bank over its focus on fighting inflation,
saying the RBI needed to abide by government policy to promote economic
growth.
An RBI panel last month proposed introduction of
inflation targeting into monetary policy, with the specific aim of a
consumer price index (CPI) of 4%, with a 2% band on either side. The RBI
has raised interest rates by three-quarters of a percentage point since
September to bring down consumer inflation, which fell to 8.79% last
month from double digits in November, even as the government has
traditionally preferred to focus on bolstering growth.
“It’s not as if the government is on a different page on
what we’ve been doing on inflation thus far. They may have different
views on what they would like to see done, but there is a process, there
is a conversation,” Rajan said in an interview with CNBC, broadcast by Indian channel CNBC-TV 18 on Monday.
“I think there is fair amount of coordination at the highest level.”
The government and RBI have often been at odds in fighting inflation.
While the central bank has often blamed the government’s
expansive fiscal policy and failure to ease infrastructure bottlenecks
for high inflation, a growth-obsessed government, at times, has found it
hard to digest interest rate increases.
‘No disagreement’
RBI is not technically independent—the governor and his
deputies are appointed by the government—although it generally enjoys
latitude in policy-making. Rajan said the central bank panel’s report on
inflation was consistent with the government’s stance. “We have a
committee which has suggested a target, which is also by the way,
consistent with the process finance ministry’s committee has suggested,
so there is no disagreement about broader need to get a framework in
place,” he said.
“I think in terms of how I see the process, is really
that the government sets the objective, and the central bank delivers on
that objective,” Rajan said.
Rajan also reiterated his call for the Federal Reserve to
take into account the impact of its withdrawal of monetary stimulus on
emerging economies, despite saying he was comfortable with the current
pace of tapering.
“I actually welcome a measured pace of tapering. The only
thing I have been calling for is that in the communication there should
be some sensitivity to conditions in emerging markets,” Rajan told CNBC.
“And this is not from our perspective, this is broadly
emerging markets, some of whom have been in trouble in the last few
months. But I am fully prepared for a tapering that continues at this
measured pace.” Sensex at one-month high, Nifty above 6200; top 10 stocks in focus
