The Reserve Bank of India (RBI) still has a way to go in fighting inflation and it is important that the central bank has the credibility to bring down inflation if it picks up, Governor Raghuram Rajan said.
“People say we have won the war on inflation. I am not so confident. What we need to aim for is that if there are supply shocks in future, they don`t increase inflationary expectations. We should be able to see through those shocks. That is when I would say we have won,” Rajan said.
Rajan`s words of caution come a few days after the RBI held interest rates steady in its latest policy review after a surprise inter-meeting rate cut last month.
Rajan also stressed on the need for the country to accelerate growth, saying India should not settle for “anything less than double-digit growth” in the medium term.
He also said India was importing “disinflationary conditions” from the rest of the world, helping contain domestic inflation, but said countries needed to be mindful of “an exchange rate that is too strong, which is not competitive.”