A day after he ruffled a lot of feathers by not cutting key policy rates, and pulling up the govt for not curbing its consumption, RBI D Subbarao adopted a much softer stance saying there's no room for a blame game as the onus of boosting growth was squarly on three parties — the RBI, government and industry. In defence of his action yesterday, the governor said some growth had to be sacrificed to rein in inflation. He stressed that inflation in India was still above acceptable levels.
"We want to support growth in the medium-term with low and stable inflation, which is possible only with tightening, but inflation at the current level is not acceptable," he said at a function organised by the Indian Merchants' Chamber.
He went on to say that "we would like to believe that the policy rate hikes have helped in moderating inflation... we look at all indices, be it WPI, CPI, etc in policy making. Those wanting to gauge our responses should look at them; don't criticise us for confusing..."
On Monday, the RBI left policy interest rates and cash reserve minimums for banks unchanged, disappointing investors and defying calls from government officials and companies for looser monetary policy, putting the burden on the government to bolster sagging growth.
In May, the wholesale price index (WPI) accelerated to 7.55% from a year-earlier, leaving less room for monetary easing.
Discounting fears that the country is heading to a 1991-like condition, when the government had to pawn the sovereign in offshore banks, the Governor said, "we are not at a 1991-like implosion situation in 2012 (and that) our growth story is still credible but not inevitable. We need to work hard."
On the sharp fall in crude and other commodity prices, he said this has been undone by the sharper decline of the rupee.
Also watch the accompanying video to watch the full conference.
(With input from agencies)