Amid the concerns that Reserve Bank of India (RBI) will now focus on shoring up rupee, Chief Economic Adviser to Finance Ministry Raghuram Rajan, has said that the RBI action to put stability in the exchange rate must not hurt domestic economic growth too much.
Indicating at a status-quo in July 30 policy review, the central bank’s first quarter macroeconomic and monetary development report said ‘the priority for monetary policy now is to restore stability in the currency market so that macro- financial conditions remain supportive of growth’ even though RBI admitted that Indian economy’s growth recovery is likely to be slower.
In last two weeks RBI has came up with various measures and lifted short-term rates to support the currency, making it harder for lenders to access funds. Raghuram Rajan said that “But, of course we have to be careful that the stability does not come with a serious consequence to growth.”