Don’t Compromise on Nation’s Economic Growth- Finance Minister to Banks

India’s Finance Minister Pranab Mukherjee said that while inflation is an “important factor,” the central bank shouldn’t “compromise” on the nation’s economic growth. Policy makers will have to “strike a balance” in setting interest rates, Mukherjee said in an interview, less than two weeks before the next monetary policy meeting. “Inflation is an important factor,” while “at the same time, to control inflation, we should not compromise on growth rates,” he said.

The challenge in India echoes a debate around the world among officials who are seeking to secure sustained economic recoveries without leaving stimulus measures in place long enough to create an inflation boom. A decision this week by Australia’s central bank to raise rates has sparked speculation others may follow in coming months, analysts said.

“Ever since Australia’s central bank raised its cash rate on Tuesday, markets have been on the lookout for the next candidate,” said Alaistair Chan, an economist at Moody’s Economy.com in Sydney. “In Asia, the central bank deemed most likely to tighten next is either the Bank of Korea or the Reserve Bank of India.” Governor Duvvuri Subbarao said this week that even as the Reserve Bank of India has unity on the need to raise borrowing costs, there is less agreement on when and how it should be done.

News Published Under:   Banking and Finance |

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