Controlling inflation remains RBI's priority, says Rajan

Brushing aside suggestions that the Reserve Bank of India has shifted focus from inflation management to growth, the central bank on Monday said fighting rising prices will continue to be its priority and a call on raising interest rates will be taken after factoring in more data.

". . .nobody should doubt our desire to fight inflation and our belief that interest rates are our main tool that we have.

. . .

“Nobody should doubt that," RBI Governor Raghuram Rajan said when asked if the central bank is now more keen to boost growth than to tame inflation.

He said the Reserve Bank will wait for next set of data on inflation and industrial growth before taking a call on interest rates.           

"We want to see data on how the work we have done so far is playing out and then we will take the next step.

“Don't judge me by whether I raise interest rates in every meeting," he said in television interviews.

. . .

Rajan had increased the key interest rate twice by 0.25 per cent each in successive monetary polices, but refrained from hiking it further at its December 18 mid-quarter monetary policy review despite high inflation.

The repo rate is currently 7.75 per cent.

Retail inflation climbed to a nine-month high of 11.24 per cent in November, while wholesale price inflation rose to a 14-month high of 7.52 per cent last month.

The next policy review is scheduled on January 28.

. . .

Rajan said: "Inflation targeting does not mean that you don't keep an eye on growth because the level of growth in the economy tells you how much disinflation there is already in the system."

He said while the RBI is targeting wholesale inflation at 5 per cent, it has yet to identify an appropriate level for inflation as measured by the consumer price index.

The government will release the next set of data on inflation and industrial growth in January.

. . .

'Gold smuggling will rise if import curbs continue'
 
According to a Reuters report, the RBI Governor said in an interview to television channel CNBC Awaaz on Monday that gold smuggling into India will pick up if the import curbs continue for too long.

India will keep a tight leash on gold imports despite a recent improvement in its trade deficit and lobbying by a bullion industry struggling with high premiums and a supply crunch.

Earlier this year, the Indian government and the central bank issued a series of curbs on imports of gold -- the second-most expensive item on India's import bill -- hoping to ease the pressure on the currency.

Measures included hiking import duties on gold to a record 10 per cent.