PM, Subbarao face off over RBI’s policies

New Delhi: Tensions between the government and outgoing RBI governor D Subbarao came out in the open on Saturday as Prime Minister Manmohan Singh called for "fresh thinking" on macroeconomic policy. 

    The PM threw his weight behind FM P Chidambaram who has insisted the RBI not interpret its mandate only in terms of inflation control but be more attentive to the government's growth priorities. "The time has come when we should revisit the possibilities and limitations of monetary policy in a globalized economy, in a fiscally constrained economy," Singh said. Islamic banking gets RBI clearance K erala has got the RBI's nod to launch a financial institution that will follow the principles of Islamic finance. To be floated by the Kerala State Industrial Development Corporation as a non-banking finance firm, it will not charge interest on loans or give interest on deposits. Criticism inaccurate and unfair, says Subbarao 
NewDelhi:PMManmohan Singhon Saturday urged the RBI to ensure that it focused on the government's growth priorities too, not just on taming inflation.Singh madethestatement at a function to release the fourth volume of the RBI's history, where the central bank governor D Subbarao was in audience. 
    Interestingly,Subbaraousedtheoccasion to stoutly rebut criticism of being insensitive to growth, saying it is "inaccurate and unfair" to contend the RBI was "obsessed with inflation, oblivious to growth concerns". Subbarao argued that the RBI was focused on taming inflation precisely because it was bothered about growth. "There is any amount of evidence to show an environment of low and stable inflation is a necessary precondition for sustainable growth," he said. 
    While Subbarao called the growth versus inflation debate an "over simplification", Singhdrewon hisown experience asRBI governor to stress that monetary policy needed to evolve, saying a redefinition of policy goals he had initiated in the 80s had proved to be relevant. The prime minister said, "Macro-economic policy-making,targets andinstruments, I think, is another area where I feel fresh thinking is called for, and I sincerely hope governors of thefuture, particularly Dr Raghuram Rajan, will attemptto revisitsomeof thesedifficult areas." As slipping growth accentuated the government's political problems over the last year, the finance ministry and the RBI have found themselves increasingly at odds as the ruling coalition lookedtothecentralbankto reduceinterest rates to provide a fillip to investment. 
Not a repeat of 1991 crisis: PM 
New Delhi:PM Manmohan Singh on Saturday dismissed the possibility of India witnessing a repeat of the 1991 balance of payments crisis. "There is no question of going back to 1991. At that time foreign exchange in India was a fixed rate. Now it is linked to market. We only correct the volatility of the rupee," he said. In 1991, Singh said, the country had only foreign exchange reserves for 15 days. "Now we have reserves of 6-7 months. So there is no comparison," he said. AGENCIES