Low inflation necessary for sustaining growth: Subbarao

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Food inflation
Kathmandu, Aug 13: Reserve Bank of India Governor D Subbarao on Friday said low inflation is necessary to sustain growth and a certain level of regulation is needed to rescue the Indian economy from the current global financial turmoil.

Delivering a lecture, ''Global Financial Crisis and Lessons Learnt by India", at Nepal Rastra Bank, he underlined the need to bring down inflation and inflationary expectations to sustain growth.

Subbarao also said deregulation alone is not sufficient to maintain a sound economy and a certain level of regulation is necessary for rescuing the economy from the current financial crisis.

RBI Governor's comments come against the backdrop of the central bank's fight against inflation, which was 9.44 per cent in June.

Besides, food inflation for the week ended July 30 shot up to 9.9 per cent sparking investor fears of another round of monetary tightening, which will further push up interest rates impacting growth.

RBI has hiked its lending and borrowing rates 11 times since March last year in a bid to curb consumer spending to tame the rate of price rise.

However, high interest rates have increased borrowing costs for the industry crimping corporate margins and fanning fears of a slowdown in economy's expansion.

Subbarao met Governor of Nepal Rastra Bank, the central bank of Nepal, Yuvaraj Khatiwada and shared his experience regarding the current global financial crisis with senior bank officials of Nepal. Subbarao is here on a two day visit to Nepal at the invitation of NRB Governor Khatiwada.

PTI

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