RBI’s job is to keep inflation low at all times, says Rajan

MUMBAI: Despite the clamour for a rate cut to boost the stagnating economy, Reserve Bank governor Raghuram Rajan has made it clear that the central bank favours a rate of interest that benefits both borrowers and savers.

“For the RBI, the key tasks are to keep inflation low not just today but well into the future so that we get moderate nominal interest rates that satisfy not just the vocal borrowers but also the silent savers,” Rajan said while delivering the C K Prahalad Lecture in the city on Friday.

Of late, several corporates leaders and industry chambers have been trying to pressure the central bank in to cutting interest rates. While lower rates benefit corporates who work with borro wed money , they invariably lead to lower deposit rates.And in a low-rate regime, it is often the retired people, with their life’s savings in bank and post office deposits, who struggle. Although there were expectations that the RBI chief may hint at what the central bank is going to decide in the policy meeting later in the month, especially in the light of US Fed’s Thursday night decision to hold rates steady at record low levels, Rajan didn’t oblige.

In his speech, Rajan also criticised the ‘jugaad’ mentality, a purely Indian attitude of ‘working around’ difficulties by hook or crook. Rajan said he agreed with management guru C K Prahalad, who believed that Indian businesses were capable of scaling world heights. “But there are no easy paths to the top. Jugaad… is a thoroughly Indian way of coping but it is predicated on a difficult or impossible business environment,” he said.