Reserve Bank Governor Raghuram Rajan today said inflationary expectations are high and the central bank will take a tough stance to bring it down to 5% that is not bad for a "poor economy" like India.
"Well, with wholesale price index (WPI) we will say 5%. It is a little higher than in some other countries, but you know we are in early days in terms of sticking and giving a target and sticking to it...(that's not bad for) a poor economy," he said in an interview to NDTV.
He said inflationary expectations are high and the RBI needed to "bring it down and that means we have to take a tough stance".
The Reserve Bank of India (RBI) in the second quarter monetary policy unveiled yesterday raised the the short-term lending (repo) rate by 0.25% with a view to taming inflation.
Attributing high inflation to food, services and increasing rural wages, he said: "We monitor the economy carefully... we are trying to bring this high inflationary period to an end."
"We have a weak economy, weak corporate sector, some of it is high-leveraged and we have to be mindful of all that as the patient may not survive the medicine. So, have to be careful that your rate of disinflation matches the health of the economy. We are taking measured steps." While the wholesale price index (WPI) based inflation climbed to 7-month high of 6.46% in September, the one based on consumer price index (CPI) inched closer to double digits at 9.84%.
Replying to questions on growth, Rajan said 7-8% would be feasible in the long run.
He said the growth story slowed down because of problems in allocations of natural resources like coal and spectrum.
India's growth slipped to decade's low of 5% in 2012-13. The RBI has projected the same level in the current financial year too.