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RBI Chief Says Govt Must Cut Spending

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Under attack for not reducing interest rates, Reserve Bank Governor D Subbarao said on Tuesday inflation at current levels is unacceptable and monetary tightening is required to ensure sustainable growth. The central bank Governor also said the Indian government must reduce spending and not just raise taxes for fiscal consolidation, the Reserve Bank of India's Governor Duvvuri Subbarao said on Tuesday, a day after the central bank kept interest rates steady. He said raising taxes was not the same as reducing the fiscal deficit and added it was important to look at the quality of fiscal consolidation. The government failed to contain its fiscal deficit in the last financial year that ended in March and economists expect it to overshoot the target of 5.1 percent of GDP this year also. On Monday, the RBI left policy interest rates and cash reserve minimums for banks unchanged, disappointing investors and defying calls from government officials and companies for looser monetary policy, putting the burden on the government to bolster sagging growth. Irked by the policy decision, Commerce and Industry Minister Anand Sharma had said he would take up the matter with the Finance Minister and the RBI Governor. In May, the wholesale price index (WPI) accelerated to 7.55 per cent from a year-earlier, leaving less room for monetary easing. Discounting fears that the country is heading to a 1991-like condition, when the government had to pawn the sovereign in offshore banks, the Governor said, "we are not at a 1991-like implosion situation in 2012 (and that) our growth story is still credible but not inevitable. We need to work hard." On the sharp fall in crude and other commodity prices, he said this has been undone by the sharper decline of the rupee.