NEW DELHI, November 11: Outgoing Reserve Bank governor C Rangarajan has warned against fuelling growth through excessive money supply not consistent with the growth in real income.

Delivering the ninth V T Krishnamachari memorial lecture on ``The role of monetary policy'' here on Tuesday, Rangarajan said that while an increase in money supply ``beyond what is consistent with the growth in real income, could improve the credit availability, reduce the interest cost and promote investment and growth in the short run, the impact cannot be sustained for a long period of time''. He said the final impact of such growth would be a rise in the inflation rate. In the long run, price will rise at a faster pace. Such financing policy can lead to a deterioration in the current account, deficit in the balance of payments through import leakage and loss of competitiveness of exports, he added. This policy implies a high and disproportionate growth in money supply, Rangarajan said. "It will in the long run, worsen both the internal and external balance in the economy," the central bank's outgoing chief said.

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