High inflation not only hurts the common man but also deters fresh investments that are key to faster economic expansion, which makes containing prices an express requirement, the Reserve Bank of India said on Wednesday.
"Inflation was adding on to the existing risks taken by entrepreneurs which leads to much less investments. Therefore, low and stable inflation is needed," RBI Deputy Governor Rakesh Mohan said at the annual conference of CII Western Region in Mumbai.
"For maintenance of high growth, it is important that inflation and inflation expectations are well anchored," he said.
Conditions of price and financial stability, low inflation and inflation expectation could sustain the momentum in investment and growth, he added.
The deputy governor also observed that the financial system was not geared up to fund new ideas. Credit growth to SMEs is still low which means that the banks have moved from corporates to individuals while missing out the middle.
RBI would soon come out with guidelines for credit information bureau which would reduce transaction cost by allowing banks to take informed decisions, Mohan said.
"The country may be moving towards a sustainable path of 8 to 8.5 GDP growth and said the growth momentum has to be maintained with price stability," he added.
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