Food inflation is "stubbornly" high and is a barrier to economic growth, Reserve Bank Deputy Governor Subir Gokarn said on Tuesday.Gokarn also said the present growth scenario suggests that appropriate domestic policies can help India to offset the negative forces emanating from global economy.
"The focus has to be on the domestic policies," he said.
The RBI Deputy Governor said the impact of growth-friendly policies in creating jobs has been diluted due to lack of skill and labour laws.
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Showing persistent sluggishness, India's economy grew by 5.5 per cent in the April-June quarter, mainly on account of poor performance of manufacturing, mining and farm sectors.
Concerned over the sluggish growth, the industry has been demanding a cut in interest rates but RBI has steadfastly refused to lower rates saying bringing down inflation is the priority.
On food inflation, Gokarn -- who is in-charge of the monetary policy management -- said it was "stubbornly" high mainly due to increase in consumption of cereals, sugar, proteins and pulses.
"But in the past three years, protein (like milk, fish) prices outstripped food inflation than the tradition increase in cereals and sugar prices," he added.
Soaring vegetables prices pushed up the retail inflation in August to 10.03 per cent in August, up from 9.86 per cent in July.
"High and persistent food inflation is a barrier for growth", he said at the 33rd memorial lecture of Frank Moraes organised by United Writers' Association here.
Gokarn said India's infrastructure development was a key factor for driving its growth as the country's demographic profile was better than China.
India's young population is set to grow in the coming decades while in China it will age, he said, adding the challenge was to generate more jobs to meet the demands of a young population.
Stating that India's best policy situation was between 2003 and 2008 where the average growth rate was around 8.9 per cent, he said: "there are indications that the global conditions would remain unfavourable in the months to come."
"2003-2008 there was sharp acceleration in the investment-GDP ratio", he said, adding in 2008-09 period it had declined due to the economic crisis.
Gokarn said: "We have to look at a balance between global and domestic growth...the recent global developments suggest that the context of discussion rather than global recovery should be on global uncertainties."
He said the impact of growth friendly policies seems to have been diluted by the difficulties in creating jobs that offer productivity. Some possible reasons for this mismatch was due to lack of skill among the employees and absence of labour laws, he added.