Re fall offsets low crude effect on inflation: Chakrabarty

 When asked if falling crude will help ease inflation, Chakrabarty answered in the negative saying that "the fall in crude prices has been partly offset by depreciation of the rupee. In rupee terms, oil prices have not gone down much".

The Indian basket of Brent crude has been on a downward spiral since the past few weeks and fell to USD 88 a barrel on Thursday. But it recovered a bit today, at around US89.7 a barrel. The crude was trading around USD 120 in February-March 2012.

What is working against the country is the sharper fall of the rupee that today hit an all-time low of 57.37 intra-day and closed at 57.12 to the dollar. So far, the rupee lost over 24% year to date, while the crude fall is around 25% since January. On the steep rupee fall, Chakrabarty said the factors behind currency depreciation are well known.

"We have a current account deficit, we have high inflation and we have a fiscal deficit. These factors are well-known. It is also related to what is happening globally with the dollar and how crude prices are moving. There are national factors, global factors and market fluctuation. So we do not comment on that," he said.

When asked about the RBI not cutting interest rates early this week even though growth has been in limbo, he said inflation cannot be tackled without sacrificing a little bit of growth.  "You cannot tackle inflation without sacrificing a little bit growth. If you want sustainable high growth, you need to have low inflation. There is absolutely no doubt about that," Chakrabarty said.

Last week, the RBI shocked everyone by leaving all the key rates unchanged even as GDP growth has hit a nine-year low of 6.56% last fiscal. While the retail consumer price index-based inflation moved up marginally to 10.36% in May, inflation based on wholesale price index also rose to 7.55% during the same month.

Calling for safeguarding the interests of small depositors during times of high inflation, Chakrabarty wondered why depositors should be getting interest rates which are than inflation. "If interest rates are low, but inflation is high,
then the saver is penalised. What is more ironical is thatnobody, even the media, doesn't articulate their case. If depositors do not save money, how banks will lend money?" Chakrabarty said.

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Stating that lower interest rates benefits the upper class and not the lower class one, he said  the RBI has a very difficult task of balancing the requirements of savers and borrowers.