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Our Bureau

Chennai, Oct. 31 The Mid-term policy outlook seems to suggest that the Reserve Bank of India is concerned about excess liquidity in the system, says Mr Ashish Bharat Ram, MD, SRF Ltd.

He said that strong indications seemed to suggest that the Fed would cut interest rates further , which could mean further inflows of liquidity into the Indian system. “By hiking the CRR rate, it seems the RBI wants to mop up some of the . Inflation, however, remains a concern with oil prices and other essential commodities continuing to hit record highs. By not changing interest rates, the RBI is keeping its options open on another tool for inflation check.”

The bigger concern remains the deluge of FDI money into the country which puts extreme pressure on the rupee to appreciate, he said and added that this in turn would affect the competitiveness of certain key industries in the country. “The fact is that countries such as China have been able to manage their exchange rates in an environment where their inflows have been far far higher and ensured that their exports remain competitive.” The RBI will have a challenge in seeing how they are able to manage the currency, he hoped.

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