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The Reserve Bank of India (RBI) must retain the objective of supporting economic growth as it battles price rises, Finance Minister P Chidambaram said, signalling challenges in implementing a proposed shift to target inflation.
"Inflation targeting is only one among the objectives," he said in an interview on Thursday at the World Economic Forum meeting in Davos. "Another objective of RBI must be to support growth."
This comes in the backdrop of RBI's Urjit Patel committee that recommended setting a four per cent annual cap for Consumer Price Index(CPI)-based inflation by 2016 as part of the most sweeping changes in the central bank's 78-year history.
This target was "ambitious" and the government would have a say in any final decision, said Chidambaram, who called it a "laudable objective" to work towards inflation targeting.
Prime Minister Manmohan Singh has seen policies to boost rural wages and distribute cheap food that contributed to CPI-based inflation of more than nine per cent for about two years. The slowest economic expansion in a decade has sapped support for the ruling Congress , which is trailing in opinion polls ahead of general elections due in May. Chidambaram said the government would continue curbing gold imports into the next financial year. The government would meet its fiscal deficit target of 4.8 per cent of gross domestic product in the financial year ending March 31, he said. The rupee, which fell about 13 per cent last year, pared losses after Chidambaram's comments on gold imports.
