The Hindu Business Line : RBI chief sees lower inflation

THE Reserve Bank of India Governor, Dr Y.V. Reddy, on Friday said he expects inflation to be lower than the earlier estimate of 6.5 per cent by end of this fiscal.

Dr Reddy said economic growth for the year would be higher than RBI's earlier forecast of 6.5 per cent.

RBI, in the mid-term review of its annual policy statement, had marked up inflation forecast to 6.5 per cent, from the earlier estimated 5 per cent in May 2004 and scaled down GDP forecast to 6-6.5 per cent from earlier 7 per cent.

He said RBI will conduct a comprehensive review of monetary policy in the third week of April. He was speaking to presspersons on the sidelines of a seminar organised by Fixed Income Money Market and Derivatives Association of India. Addressing the delegates, Dr Reddy said that under the provisions of the Fiscal Responsibility and Budget Management Act, 2003, the central bank will not be participating, in the normal circumstances, in the primary market for the government securities from 2006-07. RBI's technical group is currently working on the operational, technological and institutional aspects of this. Dr Reddy said that as per the recommendations of the twelfth finance commission, it is proposed that State Governments would approach the market instead of obtaining loans from Centre

Commenting on the proposed issuance of debt paper with relatively longer maturity, to enable the raising of resources for investment in infrastructure, Dr Reddy said, "the issuance of debt-paper with relatively longer maturity, outside the government of India's normal borrowing programme, is yet another recent dimension added to the debt-market developments in the country".

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RBI chief sees lower inflation