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RBI's Rajan Sees High Possibility Of Returning To Strong Growth In 2 Years

India is currently not in a phase of strong growth, but there is high possibility that the country will return to strong growth in next two years, and lower oil prices are helping inflation to ease, Reserve Bank of India Governor Raghuram Rajan said.

In an interview to the broadcaster NDTV Profit, aired on Friday, Rajan ruled out any risk of a bubble in Indian markets and said that authorities have to try to reduce the stress in the financial system.

Regarding the possible interest rate hikes by the U.S. Federal Reserve, Rajan said faster increase in U.S. interest rates could be a risk to global asset prices. He said expectations are that U.S. rates will rise slowly in the backdrop of low global growth.

Rajan also said the central bank is not targeting to defend the rupee at any specific level, but wants to curb volatility. He assured that India has made major improvements since the rupee volatility experienced in the July-August period last year.

The country now has more reserves and a much smaller current account deficit, the central bank chief said. He noted that the Indian rupee has more respectability as inflation is lower and expressed hope that the November trade deficit was a one-off. He also hoped that gold imports will fall in coming months.

The RBI chief said the central bank does not want to flip-flop on interest rates and it will make policy more accommodative in a sustainable way once the disinflationary process gains footing. An interest rate cut will take three quarters to show its impact, he added.

Rajan also stressed that the RBI was not against growth, but was looking for sustainable growth, and that keeping inflation low was the best way to support growth.

While saying that e-commerce presented tremendous opportunities, Rajan was critical of the way U.S. taxi-hailing service Uber operated in India. He said Uber was using a way of bypassing RBI regulations.

"No matter who you are, you can't violate regulations," Rajan said. "New technology needs some adjustments in terms of regulations."

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