Raghuram Rajan, former RBI governor, has said the Indian central bank will have to raise interest rates at some point of time to fight inflation and that any such move should not be seen as anti-national.
Rajan made these observations in a LinkedIn post and it comes after retail inflation shot past the upper tolerance limit (6 per cent) of the RBI for three consecutive months.
Economists and bond markets are expecting the central bank to raise the policy repo rate in its June meet and follow that with more hikes.
The former RBI governor pointed out that the war against inflation is never over while adding that prices have been rising in the country and at some point, the RBI will have to raise rates .
“At such times, politicians and bureaucrats will have to understand that the rise in policy rates is not some anti-national activity benefiting foreign investors, but is an investment in economic stability, whose greatest beneficiary is the Indian citizen,’’ he noted.
“I became RBI governor with a three-year term in September 2013 when India had a full blown currency crisis with the rupee having experienced free fall. Inflation was at 9.5 per cent then. The RBI raised the repo rate from 7.25 per cent in September 2013 to 8 per cent to quell inflation.”
“As inflation came down, we cut the repo rate by 150 basis points to 6.5 per cent. We also signed on to an inflation targeting framework with the government. These actions not only helped stabilise the economy and the rupee, but also enhanced growth,’’ he added.