Kamath worried over inflation impeding growth

ICICI Bank Chairman K V Kamath today sounded alarm bells on rising inflation saying price rise numbers at the current level are not at all comfortable.

"Current inflation numbers are not at comfortable levels. If we need to make growth sustainable, we need to control inflation and interest rates," Kamath told reporters on the sidelines of the Nasscom India Leadership Forum 2011 here.

On the impact of the successive interest rate hikes by the Reserve Bank of India (RBI), he said, if interest rates are hiked further, it can play a spoilsport for the present high level of growth.

Food inflation rose to 17.05% for the week ended January 22, rising from previous week's 15.57%, while the wholesale price based headline inflation for December also inched up to 8.43% from 7.48% in November after falling for three successive previous months. Food inflation has remained stubborn for a year now and economists say there is evidence of it spilling into overall inflation.

As inflation numbers, both food as well as general, remained unacceptably high, the RBI has raised interest rates seven times since last March to batten it down. It has raised its March-end inflation estimate to 7% in the just announced monetary policy review from 5.5% it had projected earlier in the fiscal.

The government has projected 8.6% GDP growth this fiscal on the back of an 8.9% growth in H1.

On whether high interest regime is here to stay, Kamath said, till inflation does not come under control, it will remain high. He further said, it is difficult to foresee an easy money regime now as inflation so far has not been responding to the efforts of the central bank.

"For the past one-and-a-half years, inflation has not been responding to the traditional monetary and fiscal instruments," Kamath said.