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Rajan Calls on Jaitley; Discusses Economy, Inflation
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Reserve Bank Governor Raghuram Rajan today said fighting price rise is a priority and the central bank has always maintained balance between the need to check inflation and prop-up growth.

"It is absolutely a task that the government and the RBI are engaged (in fighting inflation)," Rajan told reporters after meeting new Finance Minister Arun Jaitley here.

"RBI has always maintained the balance between growth and inflation," Rajan said, adding that the central bank would continue to do so.

The meeting, which comes just days before the next bi-monthly monetary policy review on June 3, lasted for about 50 minutes. Soon after taking charge of the Finance Ministry today, Jaitley pledged to contain price rise.

Amid the RBI maintaining high interest rate regime to tame inflation, Jaitley at his media interaction stressed upon the need of a "balancing act" to deal with the declining growth and high inflation.

A persistent decline in industrial production and a surge in inflation poses big challenge for the new BJP government, led by Prime Minister Narendra Modi, which assumed office today.

While industrial production shrank for the second month in a row, contracting 0.5 per cent in March, retail inflation surged to a three-month high of 8.59 per cent in April.

Industry leaders meanwhile have been clamouring for low interest rates to spur growth.

On the Current Account Deficit (CAD), which sharply narrowed to 1.7 per cent of GDP in 2013-14, Rajan said "yesterday's number was very healthy."

When asked about easing of curbs on gold imports, the Governor said, ''you will see policies as they are rolled out.''

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Jun 02, 2014
06:34 PM

How will following Rajan's economy produce a NEW result! His nonsense economy produces 4.6 % growth? There is talk of reducing FISCAL DEFICIT to 3% and the most we can hope for is 3% growth? How many times must I say that the economy grows at EXACTLY the same % as the growth of (FISCAL DEFICIT- TRADE DEFICIT).

Minimizing (FISCAL DEFICIT + TRADE DEFICIT) was a gold standard economy extinct since 1971. The deficit means created money now. Change its name to a more meaningful name, BHAGYALAKSHMI.

There is a saying. If you keep repeating a mistake, you should not expect a different RESULT. It will be failure every time.

Do not listen to Rajan.

Parthasarathy Shakkottai, Long Beach
Jun 02, 2014
03:44 PM

Inflation is controlled by increasing money supply to a starved economy.

1. INCREASE FISCAL DEFICITS, the source of money to the economy.It is starved for money now. It costs NOTHING to create money for a money creating govt. USA has 10% DEFICIT and zero inflation.

2. Increase interest rates as needed ( an RBI function)

Jaitly better beware of the nonsense economy of the Chicago school of economics.See data at

Parthasarathy Shakkottai, Long Beach
May 27, 2014
06:02 PM

It is better to take what Rajan says with a bag of salt. He is steeped in the Chicago school of economics (nonsense economics based on semantics) which has the wrong algebra based on confusion. You never add FISCAL DEFICIT and CAD because they have opposite effects on economics. As for as inflation is concerned, interest rate control is not the only one. Economic expansion by increased DEFICIT. Is another. USA has 10% GDP deficit and zero inflation and zero interest rates. India should increase its DEFICIT to 30% GDP to expand the economy and kill inflation.The balance is FISCAL DEFICIT - CAD = NET PRIVATE SAVINGS, as shown by data in ( USA has a huge CAD because it and buy any thing using $)

Parthasarathy Shakkottai, Long Beach
May 27, 2014
05:43 PM

Congress and Rajan lost because of algebra. Let me explain.

NET IMPORT is called FOREIGN DEFICIT = CURRENT ACCOUNT DEFICIT = CAD. The difference (FISCAL DEFICIT - CAD ) feeds the economy. The sum FISCAL DEFICIT+ CAD means NOTHING. Yet the economists keep adding them ( Rajan, Chidambaram and Manmohan Singh ) which kills the economy. FISCAL DEFICIT is vital to the economy. Now you should understand why I say algebra killed the Indian economy. X%GDP DEFICIT will grow India's economy by exactly X%GDP. For example 4.6% GDP DEFICIT will grow the economy by 4.6% GDP, as everybody knows. Manmohan Singh is to be assigned the blame for letting this happen. He was sleeping during his watch.

You need to maximize (FISCAL DEFICIT- CAD) instead of minimizing (FISCAL DEFICIT + CAD). This mistake did congress in.

Parthasarathy Shakkottai, Long Beach
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