"Sooner or later, the public always understands what the central bank is doing, whether for the good or for the bad." said Rajan. | File/PTI
Under flak from various quarters for raising rates, RBI Governor Raghuram Rajan today said the central bank is committed to the "strongest growth possible" and is on the same page as the Finance Ministry on this front.
The Reserve Bank of India (RBI) also strongly favours targeting CPI inflation but a formal adoption of the same will happen only after government approval, he said further.
"Note that the RBI is committed to getting the strongest growth possible; there is no difference between us and North Block on this," said Rajan, who has hiked rates thrice since taking over as Governor in September.
North Block, which houses the Ministry of Finance, has not been pleased with the Reserve Bank's rate increases, given their impact on investor sentiment and growth in general.
He said that even though some people may believe that in the short-run, the RBI's rate hikes may impact growth, the best way for a central bank to generate growth is to bring down inflation.
"Sooner or later, the public always understands what the central bank is doing, whether for the good or for the bad."
On inflation, he said although the central bank strongly favours the Urjit Patel's committee suggestion on targeting CPI inflation, a formal adoption of the same will happen only after government approval.
The remark comes within days of stating that RBI's view on inflation is aligned with that of the government.
After the G20 meeting in Sydney last Monday, Rajan had told a TV channel that RBI view on inflation targeting was in sync with the government view on inflation management.
"We have a committee which has suggested a target, which is also by the way, consistent with the process the finance ministry's committee has suggested, so there is no disagreement about the broader need to get a framework in place," Rajan had said.
"All we have done thus far is to adopt the reasonable suggestion of the Patel committee that we focus on CPI inflation rather than WPI inflation as our primary objective," he said at a Fimmda-PDAI conference here this evening.