RESERVE Bank of India (RBI) Governor Duvvuri Subbarao said the dollar will continue to be the global reserve currency for now, amid calls for debates to replace the US unit.
"At this time I’m not sure if there is a currency that can replace the dollar," Subbarao said in the interview with Central Banking Publications, London.
"In any case, replacing the dollar can’t happen by fiat. It has to happen on the strength of that alternate currency," he said in the interview posted on the RBI’s website late on Friday (July 10).
Subbarao said he had studied the debate for the global currency, the alternatives for it and implications for the global and emerging economies.
Countries such as China called for a debate at the G8 summit on proposals for a new global reserve currency to replace the dollar to reflect the shifting balance of power in the globalised economy.
India’s foreign secretary has said the country, Asia’s third largest economy, would be willing to discuss the proposal and a key policy adviser had said the country’s currency basket could be diversified.
Subbarao said the debate would likely carry on longer than anticipated before countries reach an agreed view on a "minimum acceptable programme".
The immediate challenge for the Reserve Bank would be to create a stage for nine per cent growth amid price and financial stability and the country should focus on increasing infrastructure investment, Subbarao said.
India’s economic growth slipped to 6.7 per cent in 2008/09, after expanding at least nine per cent for three straight years, as the global economic crisis bit.
Subbarao said inflation targeting was neither possible nor advisable by the central bank as a number of factors other than just demand and excess liquidity influence inflation.
"Import prices can drive up inflation. Capital flows could impact inflation. Decisions by other central banks could also cause inflation. Our agriculture prices are vulnerable to the monsoon and adverse weather conditions," Subbarao said.
