One-third of slowdown due to interest rate hikes, says Gokarn

Reserve Bank of India (RBI) deputy governor Subir Gokarn on Tuesday said the central bank had come to a rough conclusion that about a third of the slowdown was due to interest rate hikes and the rest due to a combination of other domestic and global factors.

In an interview with CNBC-TV18, Gokarn said the slowdown in growth is more due to global headwinds. "When the world economy was growing at 3-3.5 per cent or 4 per cent in pre-crisis years, Indian growth was close to 9 per cent. Global growth is now much less and we have seen adjustments, so some of it is there," Gokarn said. He said rating agencies would put a lot of weight on the fiscal condition when reviewing the country's sovereign rating. "So, when you are looking for signs that the rating is vulnerable, the fiscal situation is really the No.1 priority," Gokarn said.

"We got to be able to identify the right solution for the problem and fiscal consolidation is at the centre of it. Along with fiscal consolidation, if it's done with adjustments in energy prices, there is a positive impact on balance of payments also because if fuel is more expensive, there will be a little less of it imported," Gokarn said. FE

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