RBI, government to discuss timeline for 2-6% inflation target

Governor Raghuram Rajan on Friday said the Reserve Bank of India (RBI) will start talks with the government for an "appropriate timeline" to ensure the economy is within a medium term inflation target of 2-6%.

Rajan was addressing a memorial lecture with former Prime Minister Manmohan Singh called 'India's Growth Trajectory in a Fractured World Economy: Opportunities and Challenges' in New Delhi.

"Over the next few weeks, we will discuss an appropriate timeline with the government in what happens after 2016 as we move to the centre of band, the inflation band of two to six percent, what timeframe we will achieve that in, that will be discussed," Rajan said. Rajan added "a glide path" towards lowering inflation to those levels worked best for India by ensuring moderate economic growth.

The RBI governor also proposed a debate on whether the country needed more institutions "to ensure deficits stay within control and the quality of budgets is high," noting other countries had independent bodies that provided opinions on fiscal budgets. Meanwhile, former Prime Minister Manmohan Singh urged the government to take measures to step up growth rate which could only overcome unemployment.

"There is a broad national consensus that we need a growth rate of 8-9% to create 10-12 million jobs every year which we need if we have to conquer unemployment within our lifetime," Singh said.