After initiating the first phase of the exit from an easy monetary regime on Tuesday, RBI governor D SUBBARAO said the central bank would have to go for more conventional measures down the line. In an interview with GEORGE MATHEW, Subbarao spoke about the stress in the commercial realty sector, capital flows, interest rates, credit offtake and inflation. Excerpts:

You’ve reduced the target for credit offtake. There were expectations that credit growth will improve in the second half. But figures are in the reverse direction...

Our own macroeconomic situation is determined by the global situation. I have been speaking to bankers. They were saying that 20 per cent was attainable back in August. Today, they said 20 per cent is not possible. On the way forward, what I gathered from banks is that more people are coming to discuss projects. Project people are raising money from NBFCs and other external sources. They will come to bank credit down the line... perhaps in Q4 but certainly early next year.

You were highlighting about recovery. In India’s context, you have said there’s a dilemma. How acute is that?

This is a policy dilemma. Most of the economies were actually concerned about inflation. Our inflationary pressures are more acute than those of other countries. At the same time, we recognise that inflation pressures are driven by supply side pressures, especially food prices. And we evaluated to what extent monetary policy will be able to rein in inflation or anchor inflationary expectations. The cost of other side will be growth impulses might be hurt. That’s the policy dilemma.

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