Reserve Bank Governor Duvvuri Subbarao today said April inflation at 8.66% was too high and stressed upon the central bank’s resolve to batten it down to a comfortable level, indicating that he will continue with the hawkish monetary stance.
Stating that inflation needs to be brought down to a comfortable level to maintain high growth, the Governor said, “if you try to drive up growth by driving up inflation, what you will get left with is high inflation”.
The Government data released today showed a minor dip in headline inflation to 8.66% in April, driven by a moderation food and manufactured items prices.
However, the Government revised upwards the March figure to 9.04%, which was provisionally reported at 8.98%. It also revised upwards the numbers for February to 9.54% from the provisional 8.31%.
Disagreeing with the idea of inflation-growth trade-off, which is gaining currency among a section of economists, Subbarao said, “Nowhere in our history we can prove that we have had high inflation and high economic growth.
“We always had low inflation during the periods of high growth rate,” he said here at the second foundation day lecture of Indira Gandhi Institute of Development Research.
“Such a trade-off can be okay if inflation is at an accepted level, which is say around 5%. But personally, I am against any inflation-growth trade-off because this is not healthy policy stance.”
Noting that while food inflation, earlier driven by supply side issues, has now become structurally driven, he said the high headline inflation is led by manufactured items.