A senior official of the Reserve Bank of India (RBI) today said tight monetary policy alone was not responsible for the slowing of economic growth, though it might be a contributing factor.
On the sidelines of a summit on financial inclusion organised by SKOCH here, RBI deputy governor K C Chakrabarty said: “Interest rates affect growth because inflation affects growth. If inflation comes down, interest rates will come down. But to say that growth is going down only because of interest rates is a little bit of exaggeration.”
The interest rate aspect (on the slowing growth) was being overplayed, he added.
India’s GDP growth for 2011-12 grew 6.5 per cent, lowest in the past nine years. This slowdown is being partly attributed to the central bank’s tight monetary policy. RBI had raised interest rates regularly between March 2010 and October 2011 to clamp on inflation.
“I don’t think our policy rates are that high that it should significantly affect growth.”