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Why Raghuram Rajan Doesn't Want Any Credit for Economic Growth

RBI has time and again been criticised for not cutting rates aggressively to give the economy that much needed thrust.
RBI has time and again been criticised for not cutting rates aggressively to give the economy that much needed thrust.

Reserve Bank Governor Raghuram Rajan on Tuesday refused to take any credit for the uptick seen in domestic economy. India's GDP (gross domestic product) growth inched up to 7.4 per cent in the July-September period compared to 7 per cent in the previous quarter, indicating that the Indian economy is on a recovery path.

"It's actually a whole mix of factors, so I would be far from claiming credit for monetary policy. Lots of other factors including the feel-good factor introduced by the government, the public investment, lots of other things go into this. How much we are responsible I have no idea," he said in reply to a question on whether the central bank should take credit for the uptick in growth, considering the criticism it had to face for keeping rates high.

The RBI had repeatedly come in under attack by industry bodies and sometimes by the government for not cutting rates aggressively to give the economy that much needed thrust.
This year the central bank decided to frontload rate cuts to boost growth. Since January 2015, the RBI has cut repo rate by a cumulative of 125 basis points.

When pointedly asked if lack of growth is attributed to RBI, shouldn't an uptick in GDP growth be credited to the central bank as well, Dr Rajan brushed it aside saying, "that doesn't mean I should take credit when the growth takes place. We are all working together to ensure that growth takes place, I think it is in our collective interest."

"I kept emphasising and I will emphasise again- the RBI is not against growth. We need sustainable growth, we will ensure there is sustainable growth and we will ensure the maximum sustainable growth we can get," the governor said.

Dr Rajan explained sustainable growth means being within the bounds of the inflation the RBI is willing to accept, a target that is set by the government. "Our job is to create the maximum growth consistent with that."