RBI governor D Subbarao on Tuesday said growth concerns were always on the central bank's radar and it will shift from the tight money policy stance only if economic expansion falls consistently below 8 per cent, which was not the case as of now.
Allaying fears that RBI may be myopic towards slowdown in growth momentum in trying to tame inflation, Subbarao said, "I want to assure all of you that growth is never far away from our policy radar screen. We are always worried about it. But we have to balance between growth and inflation. And now inflation is significantly above our comfort level."
Addressing the press after announcing the credit policy, he said, "If we consider 8 per cent as the trend growth rate and if it falls consistently below that, then perhaps the balance would shift."
But, the Governor was quick to add that a one-time slippage will not warrant a change in the RBI stance. So far, it has not fallen below 8 per cent barring once in Q4 of the last fiscal and in FY09 when the overall GDP clipped to just 6.7 per cent, following the global financial crisis.
Explaining RBI's hawkish policy stance, Subbarao said, "First of all we have to understand that certain moderation in growth is an inevitable price we have to pay for bringing down inflation in the short-term, but it is something that will make growth in the medium growth more sustainable."
On not pegging down growth forecast to below 8 per cent despite all these negatives, the governor said, "We have to first look at it from demand side, which does not point to any serious slowdown."
On one hand, private consumption is intact as the wages grew over 20 per cent last year while consumer price inflation rose only 10 per cent. This led to steady private consumption, Subbarao said.
On another level, government consumption has not come down as this is largely insensitive to short-term interest rate increases, he added.