The Reserve Bank of India today did not give any time frame for rolling back liquidity tightening measures and said that they would remain in force till stability is achieved in the foreign exchange market.
"Reserve Bank is as anxious as everyone to roll back the cash tightening steps sooner than later. However, the measures taken will be in place until volatility in the foreign exchange market is controlled. I do not want to give any time frame in that," RBI governor D. Subbarao said while delivering the 5th R Venkataraman Endowment Lecture in the city.
In order to contain current account deficit (CAD) and arrest the value of the declining rupee, the RBI last month had raised the cost of borrowing for banks and reduced availability of funds to curb speculation in the forex market. The RBI did not roll back these measures in its first quarter monetary policy, which was unveiled earlier in the week.
Prime Minister Manmohan Singh and Finance Minister P. Chidambaram had said that the measures announced by the RBI were not indicative of firming up of interest rates in the long-term and would be withdrawn once stability was achieved in the forex market.
Responding to general criticism that the RBI has not been paying enough attention to growth, Mr. Subbarao said inflation cannot be tamed without some sacrifice on the growth front.
"Some sacrifices in growth are inevitable when you are trying to bring down inflation. But that sacrifice of growth is only in the short term...it is somewhere incorrect to see it as the tension between growth and inflation as hundreds of millions of people are hurt by inflation," he added.
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