FM backs RBI moves on inflation

Union Finance Minister P Chidambaram today backed the Reserve Bank of India (RBI) in its steps to moderate inflation and credit growth, but he stressed on the need to stimulate economic growth.

"RBI is right in taking steps to moderate credit growth. RBI will take whatever steps are required to moderate inflation, but it will keep in mind the need to stimulate growth," he told reporters, after inaugurating the 32nd International Organisation of Securities Commission here.

The RBI had raised the cash reserve ratio, or the amount banks must set aside against deposits, on March 30 for the third time since December and increased the benchmark overnight lending rate for the sixth time in 15 months.

On the growth versus inflation debate, the finance minister said that it was a balancing act and "I'm sure RBI is aware of its responsibilities".

He said the government was taking various steps including monetary and supply-side measures. "If the supply side improves together with monetary and fiscal steps, inflation will moderate," Chidambaram said.

Earlier speaking at the conference, the finance minister called for harmonisation of stock market regulations. "Regulators see only one global market. With the investor in country A, the broker in country B, the exchange in country C and the issuer in country D, the legal basis for a contract may become very complex. Harmonising the market regulations would greatly simplify the problems and reduce the compliance costs for participants. Participants will not have to comply with different regulations in different jurisdictions," he said.

Similarly, harmonisation of accounting standards would reduce the cost of investing and increase international investments.

"Regulators need to co-operate more frequently than ever before and that too at multiple levels and across countries," the minister added.