Mr YV Reddy Former RBI governor said the monetary policy actions to batten down inflation have not had the desired effect so far and opined that what is needed is low inflation even if that means low economic growth in India.

Mr Reddy said "Monetary policy actions have invariably lagged. The transmission time has been taking too long. We need to see if transmission is going through successfully. It is necessary to make an assessment that the transmission has happened."

The former RBI governor is credited for successfully anchoring the domestic economy from the ripple effects of the global financial crisis and said there was long time lag before monetary policy actions reflected into the economy.

He warned that "We are yet to see how the monetary policy actions will pan out. There are demand side pressures which need to be contained. If there is pressure on current account deficit then this can spill over."

He said on the increasingly popular view that higher economic growth can be a trade off for higher inflation that this will be highly detrimental.

Mr Reddy said "Tell me any single period when we had higher growth and higher inflation. It just does not happen that way and it is a wrong policy. What we need is low inflation and if it demands low growth, so be it."

"Global inflation outlook is highly uncertain and will have impact on developing economies. While many countries are fighting inflation, many are facing deflation too, as there are many structural and cyclical factors driving both these factors."

He said "it seems that prices have almost peaked especially the inflation driven by this has peaked. However, many uncertainties still persist with commodity prices across the globe."

(Sourced from indianexpress.com)