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A day after the Reserve Bank of India’s policy announcement, the Governor, Dr D. Subbarao, said that there is a need to revive investments to spur growth.
“There is a need to produce more before consumption. And before that we need to increase our investments to revive growth,” the Governor said at the 104{+t}{+h} annual general meeting of the Indian Merchants’ Chambers.
The macroeconomic situation of the country is a cause of concern as the growth rate has declined in every quarter in 2011-12, investments have gone down, the rupee has depreciated 20 per cent since June last year, he added.
The central bank has cut the CRR (cash reserve ratio) by 100 basis points (bps) since January and key interest rates by 50 bps in April.
The Governor rejected the perception that monetary policy has not reduced inflation but stifled growth. “You do not know the counter to that had the RBI not adjusted policy rates.”
“If the (current) interest rates have stifled growth, how are the real interest rates in the pre-crisis levels higher than the rates today and the real average weighted lending rates lower than that in the pre-crisis levels?”
Dr Subbarao said that both the wholesale price inflation and consumer price inflation are still above acceptable limits.
Wholesale Price Inflation and Consumer Price inflation was 7.55 per cent and 10.36 per cent for May respectively.
>satyanarayan.iyer@thehindu.co.in
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