The RBI’s tight liquidity policies led to short-term growth sacrifices, but Subbarao defended them as necessary. He argued that “low and stable inflation is a necessary condition for steady growth,” stressing that controlling inflation ultimately benefits the economy in the long run.
On monetary policy, he emphasised that the RBI
can only support growth up to its potential but cannot push beyond it.
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There is an ongoing debate about whether India’s slowdown is temporary or due to deeper structural issues. Subbarao believes it is “partly structural and largely cyclical,” pointing to global trade uncertainties, high interest rates, and geopolitical tensions as short-term constraints. However, he remains optimistic that growth will return as these factors stabilise.
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With increasing trade protectionism, Subbarao highlighted the complexities of India’s trade relationship with the US. While an India-US Free Trade Agreement (FTA) could be beneficial, he warned that it would not be easy to negotiate, especially given India’s agricultural sector.
For the full interview, watch the accompanying video
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