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— P.V. Sivakumar

Watching global conditions: Dr Y.V. Reddy, RBI Governor, with Dr Y.K. Alagh, IRMA Chairman (left), and Dr G.S. Bhalla, Emeritus Professor at Jawaharlal Nehru University, at the annual conference of the Indian Econometric Society at the University of Hyderabad on Thursday.

Our Bureau

Hyderabad, Jan. 3 The Reserve Bank of India is open to considering changes in the capital account and monetary management policies in tune with the changes in global liquidity conditions.

The immediate focus of the apex bank, however, is on managing excess capital inflows and some volatility with regard to the excess, Dr Y.V. Reddy, Governor, RBI, said in his inaugural address at the 44th annual conference of the Indian Econometric Society here on Thursday.

“I believe that it will be prudent not to exclude the possibility of some change in course, due to any abrupt changes in sentiments or global liquidity conditions, despite strong underlying fundamentals of the Indian economy. Strategic management of capital account would warrant preparedness for all situations, and the challenges for managing the capital account in such unexpected turn of events would normally be quite different,” he said.

The RBI would continue to analyse and monitor “different scenarios and possible contingencies so that capital account and monetary management continue to facilitate high growth, while maintaining price and financial stability,” he said.

Stating that there were pressures in the global money and credit-markets, Dr Reddy said many leading central banks in the world sought to inject liquidity into the overnight as well as term money markets.

“The impact and outcomes of these recent actions of monetary authorities still appear unclear for the immediate future on the financial markets and for the longer term on the real economy in terms of growth rate as well as price stability. In the meantime, the equity markets in most economies are buoyant but are far more volatile over longer periods than in the recent past,” he observed.

In India too, management of capital account had become an important element of public policy and the emerging challenges to the management, both in the short and over the medium-term, had been well-recognised, he said.

The RBI would keep track of the global situation and its ramifications on Indian economy so as to ensure that capital account and monetary management continue to facilitate high growth, while maintaining price and financial stability.

Dr Reddy also released India Development Report 2008, brought out by the Indira Gandhi Institute of Development Research.

Prof. R. Radha Krishna, President, Indian Econometric Society, said the recent data on poverty revealed that there was no acceleration in the pace of poverty reduction in the State where it mattered the most. “The co-efficient of variation of poverty reveals widening inter-State variations in poverty reduction,” he said.

Dr C.R. Rao, Eberly Professor, Pennsylvania State University, USA, said the growth in gross domestic product should also benefit the poor.

Reviewing India Development Report 2008, Prof G.S. Bhalla, Emeritus Professor, Jawaharlal Nehru University, said the growth prospects for Indian economy were bright.

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