Reserve Bank of India Governor Raghuram Rajan warned on Friday that straying from fiscal consolidation and easing up on the fight against inflation would jeorpardise the country’s economic stability at a time of global market turmoil.
Source: RBI warns against looser fiscal policy | Reuters
Reserve Bank of India Governor Raghuram Rajan warned on Friday that straying from fiscal consolidation and easing up on the fight against inflation would jeorpardise the country’s economic stability at a time of global market turmoil.
The blunt words, in a speech to a research body in New Delhi, come as the government is looking at proposals to widen its budget deficit targets to steer more spending into infrastructure, while government officials have called on the central bank to cut rates further to help boost the economy.
But Rajan said loosening its focus on inflation or the fiscal deficit risked pushing India onto a path similar to Brazil’s, saying the South American country passed big stimulus measures and cut interest rates aggressively, but is now suffering from the hangover of those policies.
It would also risk pushing India into a similar situation as 2013 when the country suffered its worst crisis in more than two decades, and dent its appeal at a time when the rest of the so-called BRIC economies are struggling, Rajan added.
“It is at such times that we should not be overambitious,” Rajan said.
'); var s = document.createElement('script'); s.type = 'text/javascript'; s.async = true; s.src = 'https://ad.admitad.com/shuffle/289c251618/'+subid_block+'?inject_to='+injectTo; var x = document.getElementsByTagName('script')[0]; x.parentNode.insertBefore(s, x); })();