Ahead of Reserve Bank’s quarterly policy review on January 28, Planning Commission Deputy Chairman Montek Singh Ahluwalia has asserted that containing inflation should not be the only target of central banks adding that central banks should have to look at multiple targets.
The RBI has been continually raising the policy rates over the past few months in order to restrain rising inflation. In recent mid-quarter monetary policy review on December, the RBI had kept key policy rates unchanged expecting that inflation would get moderated. Retail inflation eased to a three-month low level of 9.87% for December 2013 on point to point basis, as compared to record high level of 11.16% in November. Meanwhile, prevailing high interest rates and economic downturn have been exerting pressure on the domestic industries. India’s annual industrial output growth, measured by index of industrial production (IIP), contracted further by 2.1% in November on y-o-y basis as compared to 1.8% in October.
Referring to the country’s financial sector, Ahluwalia pitched for further liberalisation of the country's financial sector. Meanwhile, the RBI recently gave freedom to banks to open branches and is also in process of issuing new bank licences in the private sector. Recently, the central bank has also suggested the banks for setting up of specialised banks to cater to low income households to ensure that all citizens have bank accounts by 2016 adding that facility for withdrawal, payment and deposit should be set up within a 15-minutes walking distance anywhere in the country.