RBI governor sees long term real rate challenge
"The long-term real interest rates have changed, but not in the desired direction. What is considered a neutral rate of interest is lower in relation to earlier conditions," and "even moderate inflation poses a dilemma in a growing economy," added Reddy.
Reddy maintained the inflation forecast range of 5-5.5% and the GDP forecast of 7.5-8%, and the interest rate will be adjusted to maintain these levels. "The medium term aim is to remain in the broad range for GDP and inflation."
The RBI Governor also said that, "Globally there are indications that growth is slowing down inflation and interest rates are hardening. Our assessment is that India cannot remain insulated but will be les affected by these developments because of inherent strengths and resilience."
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