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RBI should not be overly concerned about inflation: SBI's chief economist

The economist also suggested that the govt must go for a fiscal push

Press Trust of India  |  New Delhi 

RBI should not be overly concerned about inflation: SBI's chief economist

The Reserve Bank of India (RBI) should not be overly concerned about retail target of 4 per cent as the targeting may lead to decline in output, affecting growth, SBI's chief economist said today.

"should not be overly concerned about to be at 4 per cent. As it has a plus/minus bias of 2 per cent so if moved in from 4 per cent to 6 per cent it is fine," State Bank of India (SBI) Group Chief Economic Adviser said at an interactive session here today.


"So even if it moves to 5-5.5 per cent for some period of time it is not going to harm. It there is an targeting then there is a decline in output (over the period of time)," he said.

He also cited empirical evidence suggesting that targeting countries, which tend to disinflate rapidly in the initial years, tend to witness a decline in output that affects growth.

In early 2015, the and the government signed a framework targeting to tame to 4 per cent with a band of plus/minus 2 per cent from 2016-17 onwards.

Ghosh said if the government and the move towards the 4 per cent by January 2018, as suggested earlier, it will leave limited room for rate cut in forthcoming policies.

In its fourth bi-monthly announced a day earlier, Reserve Bank kept the key policy rate at which it lends to banks -- the repo -- unchanged at 6 per cent citing inflationary pressure going forward.

The economist also suggested that the government must go for a fiscal push.

"Policy should now focus on structural bottlenecks and not putting money in the hands of consumers. The first of these is to recapitalise PSB is through widely discussed recapitalisation bonds that has not only precedence in India but also in many other countries (Korea, Malaysia etc)," Ghosh said.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, October 06 2017. 21:57 IST
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