Reserve Bank of India to introduce plastic money on pilot basis.

The Reserve Bank of India (RBI) is planning to introduce plastic currency on a pilot basis as it has been proven to be economical and environment-friendly when compared to paper currency, said RBI governor D Subbarao here on Friday.

"We contemplated introducing plastic currency 15 years ago, gave it up and now we are trying to do this again as a pilot experiment. A lot of research analysis has gone into this about the cost and acceptability. Plastic currency is proven to be economical and would probably save us money," he said while speaking at the inauguration of the new Post Graduate Programme (PGP) batch at the Indian Institute of Management Kozhikode (IIM-K) on Friday.

Subbarao said RBI had asked the Centre for Environmental Studies, Nagpur, to conduct a rigorous environmental impact study on the introduction of plastic currency after a school girl from Andhra Pradesh wrote to him three years ago raising concerns about the move.

"We got a study done by the Centre for Environmental Studies in Nagpur and they have verified and told us that the carbon foot print of plastic currency is lower than that of paper currency," he said. Responding to recent criticisms from the corporate sector against the interest rate policy of the RBI, Subbarao said inflation cannot be controlled without sacrificing some growth.

The RBI governor added that the sacrifice of growth to manage inflation is only in the short term. In the medium-term, there is actually no trade-off between growth and inflation.

He said while drawing a balance between growth and inflation, the RBI has to factor in the hundreds of millions of people in the country who are affected by inflation.

"Just as we have to listen to the articulate and vociferous voice of the pro-growth lobby, we also have to listen to the silent voice of people who are hurt by inflation as they are not represented on TVs and newspapers. We have to walk that extra mile to hear that voice of people who have been hurt by inflation," he said.

Subbarao said RBI, as the guardian of price stability, has to ensure that inflation expectations are anchored and not unhitched.

"No matter what the drivers of inflation are, whether it is imported inflation or caused by supply demand pressures, if inflation is left unchecked, the inflationary expectations tend to get firmed up," he said.

Debashis Chatterjee, director, IIM-K also spoke on the occasion. The RBI governor also inaugurated the RBI gallery set up as part of the Indian Business Museum at the IIM-K.