The Hindu Business Line : As inflation falls, RBI is shifting focus to growth

Hyderabad, Dec. 4 The Reserve Bank of India (RBI) is shifting its policy focus to growth, moving away from measures directed at curbing the inflation, according to Dr D Subbarao, its Governor.

Speaking to newspersons on the sidelines of an international meet on `Mitigating spill-over and Contagion: Lessons from financial crisis’ jointly organised by the RBI and the Bank for International Settlements (BIS) here on Thursday, Dr Rao said the monetary steps taken in the recent past had given positive results.

As inflation has been decreasing for the last three weeks, there is now a need to maintain a balance between growth and inflation as well, he added.

When quizzed on the much anticipated rate cut, Dr Rao avoided a direct replay by stating: ``I can’t, at this point of time, tell you what we will do or when”. The RBI and the Government are monitoring the situation closely and would take appropriate action at an appropriate time. Though the rate cut is a key tool to boost demand ``it is not the only tool,” he said.

The RBI would do the needful to ensure liquidity for the banks and credit flow to the productive sectors, he said. ``Our aim is to maintain comfortable liquidity and we will do it,” he said.

When asked about the hesitation of banks to cut the interest rates even after repeated rate cuts by RBI, the Governor said the role of RBI is only that of a regulator and it cannot issue a mandate to banks to cut rates. “We will only send out signals; we are in constant touch’ he said.

On the volatility in financial markets and the likely market behaviour in days to come, Dr Rao refused to predict adding that India would be the ``first and fastest to recover from the crisis”

The seminar, in which top executives from central banks of eight countries including UK, Canada, Australia and Switzerland participated, was closely guarded from the media and Dr Rao accepted to speak to newspersons only after much persuasion.