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Our Bureau

Mumbai, Jan. 29 The Reserve Bank of India expects inflation to remain between 4 and 4.5 per cent in the next fiscal. Despite global uncertainties, the RBI’s target for GDP growth remains on track at 8.5 per cent.

“In 2009, after recognising the possible uncertainties in the global situation we should aim for at least 8.5 growth, if not more. Inflation should go to 4-4.5 per cent in 2009. If we want global integration then 4 per cent is better and that is what we should have in 2009,” Dr Y.V. Reddy, Governor, RBI, told reporters at a press conference.

However, concerns about inflationary pressures persist.

“There is some suppression of inflation because the pass through of international oil prices has not occurred. All over the world, people look at the consumer price index. If at all you want to make global comparisons and also from the point of view of inflation expectations, we should look at consumer price index, which is around 6 per cent,” he said.

The Governor has warned about corporates and banks having large exposures in foreign currencies.

“In the recent past we have found that some large corporates have large exposures to foreign currencies, directly or indirectly. If you have a large foreign currency exposure and if it results in adverse situation for corporates, it will affect the credit quality of banks,” he said.

The RBI emphasised the need for data on employment creation and the central bank will be in talks with the Finance Ministry to include this as part of public policy.

“There is anecdotal evidence to show that there are some pockets where employment may not be expanding. We want to address that issue. It has to be part of the public policy and we will be interacting with the Government,” he said.

Dr Reddy said that that the domestic considerations were very different from those in the US.

“In the US, the monetary authority is addressing the threat of a slow down. We are facing a moderation from 9 per cent plus to a more viable situation,” Dr Reddy.

“Secondly, the US is pumping liquidity into the markets. Most of the time we are absorbing liquidity. For financial institutions and leading banks in the US, capital has to be injected and profitability is in question. For us, profitability is plenty and capital is adequate,” the Governor explained.

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