The Reserve Bank on Thursday said that it can not work as inflation targeter, as it will not serve the best interest of macroeconomic management.

“The Reserve Bank can’t be an inflation targeter, or a core inflation targeter. That will not serve the best interest of the macroeconomic management of the country,” said Mr Duvvuri Subbarao, RBI Governor at the two—day Second International Research Conference, organised by the Bank, here.

He also maintained that central bank, which hiked policy rates a record 13 times last year to tackle inflation, cannot pursue a policy completely oblivious to growth.

Mr Subbarao, however, said that in the past 60 years no government was insensitive to inflation, and inflation management usually takes precedence over growth concerns.

RBI had come under criticism in the last one—and—a—half years for aggressive monetary stance on inflation.

“If supply side constraints affecting inflation are not managed, is it realistic to expect RBI to contain inflation?” Mr Subbarao asked, and added that the central bank too was confused as to which index of inflation should be targeted as there are many indices.

About the rising government borrowing, Mr Subbarao said it may not be possible for the monetary policy to remain “indifferent” to government borrowing programmes.

(This article was published on February 2, 2012)
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