The Hindu Business Line : RBI fully geared to fight inflation

In efforts to stem the rising inflation levels, the Reserve Bank of India (RBI) is ready to take recourse to the full range of instruments, according to its Governor, Dr Y.V. Reddy.

These measures could include both conventional and unconventional, he told newspersons after delivering the convocation address at the Acharya N.G. Ranga Agricultural University.

Referring to the impact of the fuel price hike on inflation, Dr Reddy said the global hike in oil prices and subsequent increase in Indian domestic prices were more than anticipated by the central bank.

“However, we did factor in the hike in oil prices in our policy. The RBI is also ready to use forex reserves which are meant to meet any shocks, such as the oil shock”, Dr Reddy said.

The current fuel prices can be referred to as an ‘extraordinary situation’, and in this context the RBI will focus on careful management of the liquidity conditions in the country, the Governor said. “It has assumed some urgency now”, he commented.

On the impact of the fuel price on the GDP growth, Dr Reddy said the growth would be in the anticipated range of 8 to 8.5 per cent, subject to a ‘normal’ monsoon. He felt that the Centre’s decision to hike domestic fuel prices was very appropriate. The Governor was responding to a range of questions from newspersons.

On the financial markets, Dr Reddy said globally the conditions will soon reverse to normalcy and Indian fundamentals in financial markets are strong.

Earlier, Dr Reddy said the food prices are expected to ease in the coming months. “Overall, some abatement of global prices, indications of better domestic supply in addition to our buffer stocks along with a series of measures taken by the Centre to increase supply are expected to yield results,” Dr Reddy said on the outlook for the near future.

There was a need for the spread of insurance against crop, and newer forms of credit assessment and risk management systems may also have to be put in place.

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