Justifying his decision not to cut interest rate, the Reserve Bank of India Governor, Raghuram Rajan, has said that the role of regulators is not just boosting Sensex.

“Financial stability sometimes means regulators, including the central bank, have to go against popular sentiment. The role of regulators is not to boost the Sensex but to ensure that the underlying fundamentals of the economy and its financial systems are sound enough for sustainable growth. Any positive consequences to the Sensex are welcome but are only a collateral benefit, not the objective,’’ Rajan said, while addressing a seminar organised by FICCI.

He said that in addition to inflation, however, a central bank has to pay attention to financial stability. “This is a secondary objective, but it may become central if the economy enters a low-inflation credit and asset price boom,’’ he said.

This remark has come at a time when Rajan is facing criticism from all quarters for not lowering rate even both the wholesale and retail inflation are at record low.

Rajan also informed that a 'Volker' like disinflation was never on the cards in India, but an “Urjit Patel glide path fits us very well, ensuring moderate growth even while we disinflate. Going forward, we will discuss an appropriate timeline either with the Government in which the economy shall move to the centre of the medium-term inflation band of 2-6 per cent time band.’’

Giving his inputs for growth, he said that the country is more dependent on the global economy than one thinks.

He felt that domestic demand growth is notoriously difficult to manage and typically leads to excess. That is why “we need to strengthen domestic macroeconomic institutions, so that we can foster sustainable and stable growth.’’

At the same time, he said, foreign market cannot be allowed to shrink further. “We have to take up the fight for an open global system. Rather than being reactive, we have to be active in setting the agenda,’’ he opined.

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