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Ahead of its first quarter monetary policy review on July 31, the Reserve Bank of India (RBI) said sacrificing some economic growth is necessary to rein in price rise.

“Inflation hurts poorer people much more than it hurts rich people. You cannot control inflation without sacrificing some growth that is inevitable but the sacrifice of growth to manage inflation is only in the short term,” RBI governor D Subbarao said while delivering a lecture at the Indian Institute of Management here.

In the medium term, there is actually no trade-off between growth and inflation, he added.In view of slowing economic growth, there is clamour for rate cuts to fuel expansion. In its June 18 policy mid-quarter review, the central bank citing inflation as main reason had kept the interest rate (repo rate) unchanged despite widespread anticipation of at least 0.25 per cent reduction .

Meanwhile, RBI also said it is planning to introduce a pilot project for issuing of plastic currency as it has proven to be economical and probably will save money. Delivering the lecture on ‘Reserve Bank of India: Making a Difference in Everyday Life’ at the IIM-Kozhikode, Subbarao said, “we have contemplated this some 15 years ago. But gave it up. Now we are trying to do it again as a pilot experiment.”

A lot of research and analysis went into this about its cost and acceptability, he added.
Subbarao informed that a 15-year old girl from Andhra Pradesh had written a letter to him saying that she had seen newspaper reports about RBI’s plans to start plastic currency as a pilot project.

The RBI governor said he then asked officials to conduct detailed environmental studies. The Centre for Environment Studies, Nagpur had conducted vigorous studies and informed the RBI that carbon footprint of plastic currency is lower than paper currency, he added. Subbarao said, “Plastic currency is suitable to India as it can withstand our weather conditions.”