RBI Governor D Subbarao on Monday stuck to a hawkish tone, reiterating concerns about sticky inflation and once again prodding the Government to do its bit by reigning in its fiscal profligacy.
The RBI has stayed on hold since cutting its main interest rate in April by a bigger-than-expected 50 basis points to 8%.
The WPI based inflation for July is likely to stay around the same level as in June, according to reports.
The RBI’s next scheduled policy review is on Sept. 17.
Subbarao said that domestic factors were responsible for the slowdown in the country's growth momentum, and added that declining investments were a cause for concern.
The RBI Governor also said that the RBI does not have adequate room through monetary policy to respond to a crisis arising from global factors.
Deficiency of rainfall is a cause for worry as it might put pressure on some commodities, he added.
Delivering a lecture in Thiruvananthapuram on Monday, he said that 6% GDP growth would not get India anywhere in the global comity of nations.
“We must look to grow 10% for another 15 years in order to raise our status from a low-income country to a medium-income one,” Subbarao said.
The talk on “India in a globalising world: Some policy dilemmas” was the second in the series hosted by the Kerala planning board.
Subbarao said that the country would need to urgently embark on a path economic and governance reforms.
“Importantly, we must seek to pursue these reforms with zeal, passion and a sense of purpose so as to put ourselves back on the path of high growth witnessed during 2003 to 2008,” he said.
On the country’s swelling current account deficit, he said that the RBI was seriously reviewing the factors that have led to the spike in this figure.