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Growth, inflation to decide RBI Monetary Policy

October 01, 2009 19:30 IST

Faced with the challenging task of balancing growth and inflation, the Reserve Bank of India will take measures in its quarterly review later this month to perk up the economy and to control inflation, which rose to 0.83 per cent for the third week of September.

"We will take into account a complete picture of the macro-economic situation to decide the monetary policy in order to support the economic recovery and the issue of controlling inflation," RBI Governor D Subbarao told reporters in Gangtok after the board meeting of the central bank.

"We will be do (to the best of judgement) what is the best for the economy," he said referring to the scheduled quarterly monetary review on October 27.

Subbarao refused to divulge the prospective monetary policy in view of the surge in inflation and other economic issues and said that it will not be advisable to give further details in the matter.

 Rising inflation, particularly retail price indices, is giving tough time to RBI as any step to hint tight monetary policy will retard revival in growth that is still in a fragile stage.

While wholesale price inflation is at 0.83 per cent only, food inflation is rising very fast. Also, most consumer price inflation are at double digit because of higher weightage of food prices in it.

Indian economy grew by 6.1 per cent in the first half of this fiscal and economic expansion is expected to slow down in the coming two quarters.

In view of the government commitment at G-20 for not withdrawing stimulus packages "prematurely" will not allow the RBI to reverse its policy stance and hint hike in interest rates.

But if does not tighten money supply, inflation could continue to rise, presenting a dilemma before the RBI.

Subbarao had already said the question of promoting growth or arresting inflation would fall on India much sooner than other countries.

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