Former Reserve Bank governor Y V Reddy on Monday said the monetary policy actions to batten down inflation has not had the desired effect and opined that trading off higher inflation for higher growth would be detrimental in the long-run. Monetary policy actions have invariably lagged. The transmission time has been taking too long. We need to see if transmission is going through successfully. It is necessary to make an assessment that the transmission has happened, Reddy,who is credited for successfully anchoring the domestic economy from the ripple effects of the global recession,said. Reddy was talking to reporters after delivering a lecture on Financial sector legislation: Random lessons from random experiences at Indira Gandhi Institute of Development Research here. He also said that going by the lag in the monetary transmission,the country would need to live with higher inflation in medium term. We are yet to see how the monetary policy actions will pan out. There are demand side pressures which need to be contained. If there is pressure on current account deficit,then this can spill over, he warned. On the view that higher growth can be a trade-off for higher inflation,he said,this will be detrimental. Tell me any single period when we had higher growth and higher inflation. It just does not happen that way and it is a wrong policy. What we need is low inflation and if it demands low growth,so be it, he said.
