Possibility of robust growth over next two years: Rajan

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SME Times News Bureau | 27 Dec, 2014
There is a high possibility that the Indian economy will witness strong growth over the next two years, RBI governor Raghuram Rajan said on Friday.

"(There is) a high possibility that India grows reasonably strong over the next two years. Growth can't be instantaneous," Ranjan said at an interaction with students on a news channel.

The RBI governor, who famously predicted the US sub-prime asset bubble bust that sparked a global economic slowdown in 2007 viewed that there is no bubble in the Indian stock market.

"I don't see a bubble in Indian markets," he said.

The Bombay Stock Exchange benchmark index, Sensex, has gained 6,000 points or over 25% in 2014 despite slow economic growth, raising concern that the Indian stock market is overpriced.

Reacting to the persistent calls for interest rate cuts from the government and the industry, he said that the apex bank cannot 'flip-flop' on rates with every rise or fall in the inflation and would rather wait for a stable low price scenario.

"This month inflation was 2 per cent, therefore I will cut this much. Oh! it went up to 5 per cent, may be I should increase it. That's not how a central bank," he said.

Wholesale inflation in November dropped to zero level, the lowest in about five and half years while retail inflation too fell for the the fifth straight month in November.

Rajan, who has kept the key policy rate at 8 percent since January, said that the RBI is against growth, but it is for sustainable growth.

Government wants low inflation and the best way RBI can aid growth over the medium term is by keeping inflation low, he said.

Similarly, the challenge of inflation needs to be addressed in a sustainable way, he said, adding that the supply side problem is yet to be fully solved.