Mumbai: Prime Minister Manmohan Singh on Thursday set a three-point agenda for the Reserve Bank of India (RBI) to get the Indian economy back on a high growth path and ensure inclusive growth.
Speaking at the Indian central bank's platinum jubilee celebrations in Mumbai on Thursday evening, Singh said: "The RBI needs to keep inflation under check, ensure stability of the financial sector and meet the financial intermediation needs of a rapidly growing economy."
"As we pursue our objective of achieving rapid and inclusive growth, our monetary and financial policies must be guided by the three objectives," he said.
These, he elaborated, are to keep inflation under control since it hurts the common man the most and distorts economic signals; ensure stability of the banking and financial sector otherwise we run the risk of experiencing financial crises which always impose high costs; and the need for financial intermediation for rapid and inclusive growth.
Singh asserted that the Indian economy would grow at 9 percent by 2011-12, which is the end of the 11th Five Year Plan. He said that he has directed the Planning Commission to explore the feasibility of a 10 percent growth in the 12th Five Year Plan.
Referring to lessons from the recent global financial crisis, Singh said that the RBI would play a very important role, in design and implementation of appropriate financial regulation in India and also in the evolution of the new architecture of the financial regulation internationally through the Financial Stability Board.
"Financial regulation must be designed to avoid excessive risk-taking, keeping in mind that banks must protect their balance sheets from cyclical variations," he urged.
Cautioning against drawing wrong conclusions from the global financial crisis, Singh said the financial sectors needed to develop further through required liberalism and innovative instruments in order to support higher rates of economic growth.
"I hear that our insulation has served us well and so we should avoid experimentation and further liberalisation in this sector. This would be the wrong lesson to learn from the crisis and we must not draw the conclusion that financial innovation is not important in our situation," Singh said.
Present at the occasion were Finance Minister Pranab Mukherjee, Maharashtra Governor K. Sankaranarayanan, Chief Minister Ashok Chavan and RBI Governor D Subbarao.
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