The Hindu Business Line : ‘RBI will act swiftly when needed’

New Delhi, Oct. 24 The Finance Minister, Mr P. Chidambaram, said on Friday that the Reserve Bank of India’s mid-term review of the Annual Policy statement for the year 2008-09 was on expected lines.

He also highlighted that the central bank had said that it would continue to use the liquidity adjustment facility (LAF) window flexibly and that more liquidity would be infused if necessary.

“So this is on expected lines and I have no further comment on that. Monetary Policy statement is not the last word. The RBI has retained the flexibility to act. RBI will act swiftly and pro-actively, as and when necessary,” Mr Chidambaram told reporters outside Parliament soon after the Monetary Policy review was announced.

He said that the RBI had endorsed the Government assessment that the Indian financial system was strong and healthy despite the turmoil in the global financial markets.

The Finance Minister said that the RBI would use both conventional and unconventional tools to manage the trinity of price stability and financial stability along with sustaining growth. “We cannot always depend on conventional tools. Unconventional and unorthodox measures will also be taken if needed,” he said.

‘Remain calm’

Mr Chidambaram said that India was facing the ripple effect of the global financial crisis and that it was necessary to remain calm and confident. “It is necessary to remain calm and confident so that we can ride this crisis out and calm would return to the world markets. Once the global situation is managed and confidence is restored, we will return to our higher growth trajectory,” he said.

Mr Chidambaram said domestic investors were panicking and asked them to stop taking cues from other markets. “There’s nothing to fear but fear itself,” he said. “We must stop imitating other countries. We must stop taking cues from other markets.”

Asia’s third-biggest economy expanded almost 9 per cent on an average in the five years through March 31, the fastest pace in such a period since India gained Independence

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