Dimming hopes of a rate cut by the central bank at its policy meet next week, the Reserve Bank of India (RBI) Governor Duvvuri Subbarao reiterating his concern about persistently high inflation said, 'stubborn' inflation remains a major obstacle to growth in India. By adding further he said, it is not possible to bring inflation down without sacrificing some growth. But one has to realize that growth sacrifice is only in the short term.
In defence of criticism that the RBI is damaging growth by not cutting interest rates quickly enough, the governor said 'in the medium term, low inflation - price stability - is very important for sustained growth'. The RBI leaving its 9-month long hawkish monetary policy stance slashed key interests rates and reduced CRR by 25 basis points after a fall in inflation.
Meanwhile, Indian business leaders and the government have been calling for lowering the interest rates from last one year to help the economy, which is struggling with slowdown and expected to post its slowest growth in a decade at around 5-percent for the fiscal year that ends in March.
Moreover, in a big sign of disappointment, after falling to a multi-year low in January 2013, the annual rate of inflation, based on monthly WPI, again inched higher to 6.84% for the month of February, 2013 as compared to 6.62% for the previous month. However, non-food manufacturing inflation, which the apex bank uses to gauge demand-driven price pressures slowed to 3.8% in February, the weakest pace since March 2010.
