Reserve Bank of India governor D. Subbarao said on Thursday that the recent cash tightening measures will not hurt growth, although there might be pain in the short-term.
Having a stable exchange rate is important for growth to take off, he added.
Last month, the RBI further lowered the limit for borrowing by banks under the daily liquidity adjustment facility (LAF) and increased the cash reserve ratio requirements in an effort to support the rupee.
Mr. Subbarao said the central bank was as anxious as everyone else to roll back the recent cash tightening steps sooner than later. However, the measures will be in place until volatility in the foreign exchange market is controlled, he said.
He reiterated that the central bank does not target any exchange rate level for the rupee.
Reacting to consumer price inflation, Mr. Subbarao said the figure was still high, and was because of cyclical and distributional problems.
India's annual consumer price inflation picked up in June to 9.87 per cent, after slowing for three straight months.
However, at demand level, the inflation has come down, he said. Some sacrifice of growth in the short-term is inevitable while trying to bring down inflation, he added.
Copyright: Thomson Reuters 2013
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