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Ahead of budget, RBI chief Patel seeks lower government debt

RBI Governor Urjit Patel
RBI Governor Urjit Patel

Reserve Bank of India (RBI) Governor Urjit Patel urged the government to make progress in reducing high federal and state government borrowing, just weeks before Prime Minister Narendra Modi's administration is due to unveil its annual budget.

Patel, in a speech at the Vibrant Gujarat summit, said the government debt to gross domestic product ratio was also constraining the country's sovereign ratings.

India's total fiscal deficit, which is targeted at 6.4 percent of GDP in 2016/17 when combining the levels of the federal and state governments, is among the highest in G20 countries, Patel said, citing the International Monetary Fund data.

"We have to take cognisance of these comparisons and facts as we go forward to make progress. Specifically this will help us to better manage risks for ourselves and thereby mitigate financial volatility," Patel said.

Patel added that India needed to ensure its medium-term consumer-prices based inflation target of 4 percent is "secured on a durable basis" while touting the importance of "low and stable inflation," hewing closely to his previous comments on the subject.

The RBI Governor noted as well that the RBI would continue to press ahead with a "fluid transmission" of monetary policy, less than two weeks after lenders announced steep cuts in their lending rates.

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The Reserve Bank of India is the central banking system of India. It controls the monetary policy of the rupee as well as currency reserves in India. The firm regulates the issue of banknotes, maintain reserves with a view to securing monetary stability and and operate the credit and currency system of the country. The company was founded in 1935 and is based in Mumbai, Maharashtra.

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