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We are not here to kill the economy, says Rajan

He was speaking to reporters after announcing a 0.25% cut in RBI's policy rates

RBI Governor Raghuram Rajan with deputy governor S S Mundra and H R Khan at a press conference in Mumbai (pic: Suryakant Niwate)

Press Trust of India Mumbai
Rejecting suggestions that RBI's rate cut today was to please the government, Governor Raghuram Rajan said there was a mis-impression that the Reserve Bank wanted to keep rates high to look "strong and firm".

"There is no point in looking strong and firm if you will be killing the economy in the process," Rajan said, while adding that RBI will not be reckless in its policymaking and all its moves are driven by data points.

When asked whether he decided to cut rates today under pressure from the Finance Ministry, Rajan said on a lighter note: "If I cut interest rates, I want to please the government. If I don't cut interest rates, it is because I want to have a fight with the government. Make up your mind!"
 

He was speaking to reporters after announcing a 0.25 per cent cut in RBI's policy rates.

"There is a mis-impression that we want to keep the rates really high because our primary objective is to look strong and firm," the academician-turned-central-banker added.

Rajan, however, was quick to add that the move to cut rates is not conservative and that the RBI has chosen to "err" to give a boost to investment activity.

"We are moving forward, but we are not going to be reckless," he said and added that the future stance will also be driven by data.

There were widespread expectations for a rate cut for many weeks, with top government functionaries including Finance Minister Arun Jaitley, Minister of State for Finance Jayant Sinha and Chief Economic Advisor Arvind Subramanian having expressed hopes that RBI would go for further easing.

While the political leadership has been pitching for rate cuts on numerous occasions, there is a long-standing perception that RBI does not favour any aggressive monetary policy easing, leading to speculation of a tiff between the Mint Road and the North Block.

"We are trying to use whatever room we have to undertake the actions that revive the economy. We are under no illusion that the economy, especially investment, is up and running. It is not, it needs support," Rajan said.

The Governor added that all the entities, including the RBI, the government and also industrialists, have to do their best in ensuring that they come out of this situation.

On RBI's stance, Rajan reiterated, "we have to wait for more data points to give us more room if that happens going forward.

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First Published: Jun 02 2015 | 4:32 PM IST

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