 "Need to eliminate diesel subsidies: Raghuram Rajan")
The Reserve Bank of India (RBI) governor Raghuram Rajan said that there is a need to eliminate diesel subsidies. Rajan was speaking at the FICCI-IBA Annual Banking Conference held today.
"In the short run lower oil prices are helping consuming countries like us. Lower oil price means lower Current Account Deficit (CAD), lower oil subsidies and lower inflation. We need to seize this moment to eliminate diesel subsidies completely. We should take this moment to eliminate diesel subsidies as soon as possible," said Rajan.
According to Rajan there are geo-political risks like the Ukraine, the middle east and the worry is that lower oil prices may be a temporary phenomena. Rajan also believes that the government's steps to curtail fiscal deficit is helping the central bank.
Rajan had also stressed on the need to for banks to do in house project evaluation and he believes for undertaking projects this should not be outsourced.
Consumer Price Index (CPI) inflation, which the central bank tracks for setting lending rates, edged down marginally to 7.8% in August from 7.96% a month earlier.
However, according to Rajan inflation was still high and there was no point in cutting interest rates to see inflation pick up again. The RBI wants to bring down interest rates when it is feasible.