A day after hiking the key policy rates by 25 basis points, Reserve Bank of India (RBI)’ governor Raghuram Rajan terming inflation as both monetary and political issue, pressed the need for political establishment understanding the importance of curbing rising prices. However, the governor said that he was not ignorant of the issues arising from low growth that remains to be big area of concern.
Emphasizing the need for greater co-operation, the governor highlighted that in countries across the world, the monetary authority and fiscal authority were co-operative as far as possible and one which adjusted for the other.
Further, the governor pointed that if fiscal policy was expansionary then policies need to be adjusted to meet the overall disinflationary process. Notably, Rajan's predecessor D Subbarao had blamed the fiscal policies of the government for continuous spike in inflation and slow growth during his tenure. Subbarao also attributed the 'loose fiscal stance of government' for slow growth and high inflation and described inflation as a tax on the poor.
Emphasizing the need for greater co-operation, the governor highlighted that in countries across the world, the monetary authority and fiscal authority were co-operative as far as possible and one which adjusted for the other.
Further, the governor pointed that if fiscal policy was expansionary then policies need to be adjusted to meet the overall disinflationary process. Notably, Rajan's predecessor D Subbarao had blamed the fiscal policies of the government for continuous spike in inflation and slow growth during his tenure. Subbarao also attributed the 'loose fiscal stance of government' for slow growth and high inflation and described inflation as a tax on the poor.
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