India's central bank gov says cannot cut rates to counter foreign inflows: media

[MUMBAI] Reserve Bank of India Governor Raghuram Rajan said the central bank could not afford to cut interest rates to reduce foreign flows into the country because of high inflation, according to a domestic media report.

"We have got an avalanche of capital inflows. Our problem is we also have high inflation," according to a Press Trust of India report carried by The Economic Times newspaper.

"We cannot cut interest rates very quickly to the bone in order to tell those countries: don't come here expecting high interest rates."

The RBI unexpectedly cut interest rates in January but held rates steady at its policy review in February.

Although the RBI is broadly expected to cut interest rates further, India has attracted US$10.26 billion net inflows into debt and shares this year because of confidence that inflation will remain low and expectations for an economic recovery.

REUTERS