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Mar 06, 2013
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Govt, RBI must fight inflation jointly: Rajan
Chief economic adviser in the finance ministry, Raghuram Rajan, has said that a joint fight was needed to combat inflation. While the RBI plays an important role in combating inflation, the government, too, has to increase supply side measures and the private sector also had a role to play, he said.Cutting fiscal deficit is central to achieving macro-economic balance as it reduces aggregate consumption, which is important, as it gives RBI more room to reduce interest rates and encourage investment demand as opposed to consumption demand, Rajan said. Core inflation was coming down in the country but what was difficult to tackle was food inflation which had been persisting at high levels in the last few years. This is less easy for the RBI to tackle, Rajan said. A high fiscal deficit, falling investments and savings, high current account deficit and high consumer price inflation all at a time of moderate and uncertain world growth as well as potentially jittery global investors did not make for pretty reading, he said.
Source -
http://www.financialexpress.com
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