The former IMF chief economist Raghuram Rajan expresses his views on the current Indian economic scenario to CNBC-TV18.
Says Rajan, "We are in a cyclical upturn, so its natural that very strong growth would help cement that position. But it's difficult to judge since we don't have enough competition between the private and public sector for funds since markets have been very accomodative and also we have low interest rates worldwide. If the situation deteriorates then there will be a need for the competition to increase. We're not out of the woods yet.
On inflation, Rajan observes that high interest rates are going to impinge on growth in the long run. He says, " High interest rates in the long run are going to impinge on growth. You do want to slow down growth but you don't want to throw it off a cliff."
Rajan has pointers on tackling inflation, too. "How to do this in a way that you slow down the inflation process without taking away from growth, my sense is that ultimately there will have to be a monetary intervention - raising interest rates - if inflation really takes off, we won't be able to do it with purely administrative means like reducing taxes or tariffs.