If Reserve Bank of India Governor Raghuram Rajan has to choose between taming inflation and focusing on growth, it has to be the former, Nobel Laureate Andrew Michael Spence said on Thursday.
"High inflation and low growth is a tough deadlock that the Indian economy is facing," he said on the sidelines of the K B Lall Memorial Lecture in New Delhi.
He said these are hard problems but growth is not tied to inflation as such. To achieve growth in the long term, India needs to go after opportunities, he added.
“For that, the most important aspect is creating structures in all the systems,” said Spence, who had shared the Nobel prize for Economics in 2001 with George A Akerlof and Joseph E Stiglitz.
After crashing to a decadal-low of five per cent in 2012-13, India's growth dropped to 4.4 per cent in the first quarter of the current financial year, a four-year low.
However, inflation has
While the wholesale-price index-based inflation rose to an eight-month high of seven per cent in October, retail price inflation re-entered double digits after six months.
That has forced RBI under Rajan to raise the repo rate.
The central bank is expected to keep inflation as the main target in its monetary review next month.
When asked whether he supports a growth-oriented or redistribution-based economic policy, a debate between Amartya Sen and Jagdish Bhagwati, he said: “I believe Amartya (Sen) is partially right in attaching more weight to distribution for growth."
In his lecture, Spence said that major emerging economies were poised to go back to high growth.
“Emerging economies that are hit by low growth and high volatility by unconventional monetary policy are in the process of restoring towards high growth.”
Spence noted that the tradeable sector of global economy was rising.
“The tradeable sector is a substantial contributor to growth.”
