The priority of the central bank is to keep inflation low and stable, said Reserve Bank of India (RBI) Deputy Governor Subir Gokarn. Certain measures by RBI to control inflation may have short-term impact on the growth of the economy, but this had to be accepted, as there was no long-term tradeoff between growth and inflation, he added.
Fast growth over a longer period of time could take place only if inflation was low and stable, he said.
Gokarn was speaking on 'Key to double-digit growth' at the Banking and Capital Market Summit 2011, organised by the Indian Chambers of Commerce (ICC) here.
Gokarn said importance should be laid on fast, sustainable and inclusive growth, not on double-digit growth. "Sustaining high growth means maintaining inflation at low levels," he said, adding there were a lot of constraints in achieving high growth, like food productivity, up-skill and infrastructure capacity, which needed to be addressed quickly and aggressively. He predicted inflation would come down, as the growth rate had softened, a partial impact of raising interest rates. Stating 41 percent of idle cash was lying with rural households, he said it was up to banks — how they leveraged these funds for expanding their business.
