Managing growth vs inflation biggest challenge now: RBI

Sambalpur (Orissa), Feb 24 (PTI) Terming management oftension between demands of growth and of inflation as a majorchallenge after the global financial crisis, the RBI todaysaid though India recovered early, it was hit by inflationbefore others.

"In the aftermath of the crisis, our biggest challengehas been to manage the tension between the demands of growthand of inflation," RBI Governor D Subbarao said at the 24thconvocation of Sambalpur University here.

"Even though we have recovered from the crisis aheadof most other countries, inflation too has caught up with ussooner than elsewhere," he said.

Economic growth requires maintaining a low interestrate regime whereas inflation management warrants raisinginterest rates.

"In managing this tension, we are deeply conscious thatinflation is a regressive tax that hurts the poor the most astheir earnings are not protected against rising prices," theRBI Governor said.

As part of managing growth-inflation dynamics in thepost-crisis period, the apex bank has raised policy interestrates seven times since March 2010, he said, adding the apexbank was are also sensitive to the need for supporting growth,a necessary condition for poverty reduction.

The challenge of making monetary policy has become evenmore complex in the context of globalisation, he said.

"How other countries, especially, systemically importantadvanced economies, manage their monetary policies hasimplications for us and we need to take that into accountin determining our own policy stance," Subbarao said. (MORE)PTI SKN NIKMVS