'Curbing inflation key to growth'

Reserve Bank of India Deputy Governor Rakesh Mohan today reiterated the need for low inflation and inflationary expectation for sustaining economic growth momentum.

"For maintenance of high momentum of growth, it is extremely important to ensure that inflation and inflationary expectations are well anchored," Mohan said.

He was speaking on 'Sustaining Growth Through Innovation' at a seminar organised by the Confederation of Indian Industries.

Mohan said the economy is moving towards sustainable growth path of 8.0-8.5 per cent now.

"We must ensure growth momentum is maintained with price stability,"Mohan said.

Apart from low and stable inflation, overall financial stability is needed for sustaining growth, Mohan said.

There is a need for higher innovation to increase productivity and growth, he said.

"We can ensure higher growth with low inflation by having more innovation," Mohan said.

"Reduction of inflation and inflationary expectation provides for general lowering of risks that is really very essential," he said. He expressed concern about the low share of funding by banks to small and medium enterprises out of their total credit portfolio.

"Banks have moved from corporate to individual leaving out the SMEs as the SME-lending are non-collateral ones," Mohan said. He asked banks to reduce the transaction cost for funding small companies.