New Delhi: The outgoing RBI Governor Raghuram Rajan on Monday hit back at his critics who accused him of keeping interest rates too high saying they cannot “have it both ways, want lower inflation as well as lower policy rates.”
“If a critic believes interest rates are excessively high, he either has to argue the government-set inflation target should be higher than it is today, or that the RBI is excessively pessimistic about the path of future inflation,” he said.
Making his first public appearance since announcing he will step down as the end of his tenure in September, Rajan on Monday defended his record in fighting inflation.
While delivering the foundation day lecture on ‘Fight against inflation: A measure of our institutional development’ at the Tata Institute of Fundamental Research here, Rajan said investors have gained confidence in our monetary policy goals which will only improve as we meet our inflation goals.
“The RBI can never abandon inflation to focus on growth,” the RBI governor said.
“The fact that inflation is fairly close to the upper bound of our target zone today suggests we have not been overly hawkish, and were wise to disregard advice in the past to cut more deeply,” Rajan said.
“He (critic) cannot have it both ways, want lower inflation as well as lower policy rates,” the RBI chief asserted.
Consumer inflation hit a near two-year high of 5.76 percent in May, or the upper end of the central bank`s inflation target of 2 percent to 6 percent.
Rajan also strongly defended the upcoming introduction of a monetary policy panel to set interest rates – a policy he has championed – saying “the rewards will be many,” including a more stable policy framework.
He also expressed confidence that the government and the new RBI chief will internalise frameworks and institutions that have been set up and ensure low inflation future.
“In the days ahead a new governor as well as the members of the committee will be picked. I am sure they will internalise the frameworks and institutions that have been set up, and should produce a low inflation future for India,” he added.
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