RBI will have to raise interest rates to control inflation: Raghuram Rajan

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• Apr 25, 2022 | Dhupali Das

Rajan, known for his outspoken opinions, stated that the "battle against inflation" will never be finished.

Digital Desk: Former RBI Governor Raghuram Rajan said on Monday that the central bank will have to increase interest rates to control inflation but that such increases should not be viewed as "anti-national" by bureaucrats and politicians.

Rajan, known for his outspoken opinions, stated that the "battle against inflation" will never be finished.

"In India, inflation is on the rise. The RBI will have to raise the rates at some time, just like the rest of the world," he said on Linkedin.

Notably, retail inflation increased to a 17-month high of 6.95 percent in March, far beyond RBI's upper tolerance level, while wholesale price-based inflation rose to a four-month high of 14.55 percent in March, owing primarily to the hardening of crude oil and commodity prices.

"...politicians and bureaucrats must know that raising policy rates is not some anti-national action favouring foreign investors, but rather an investment in economic stability, with the Indian state as the primary benefactor," he said.

Rajan is currently a professor at the Booth School of Business at the University of Chicago.

The Reserve Bank of India (RBI) held borrowing charges fixed at a record low for the 11th consecutive month earlier this month to support economic development amid rising inflation. The benchmark interest rate of 4% was maintained.

The central bank's six-member Monetary Policy Committee (MPC) had also decided to maintain an accommodative policy "while focusing on eliminating accommodation to ensure that inflation stays within the goal going ahead while supporting growth."