With oil prices closing in on US$120 a barrel mounting pressure on inflation, Reserve Bank of India, on Monday, hinted at tight monetary measures in the annual policy to be unveiled on Tuesday, as steps by the government take time to show results.
“Inflation risks on account of oil prices remain incipient,” RBI said in its macroeconomic and monetary development document released here.
The government has initiated various fiscal and supply augmenting measures such as a ban on exports of certain items and reduction in customs duties. “These measures are expected to help in containing inflation and inflationary expectations,” it said.
Economic expansion
While steps to tackle inflation were widely expected to trip economic expansion, RBI said that notwithstanding a slight moderation, Indian economy continued to expand robustly in fiscal year 2008 at 8.7 per cent.
All three key sectors — agriculture and allied activities, industry and services — witnessed a growth moderation. However, the growth performance of the country was in line with GDP growth in the last five years, the RBI said.
The apex bank said that while the broad money growth at 20.7 per cent at end March was above the indicative trajectory of 17-17.5 per cent set out in the last policy, the bank credit to the commercial sector moderated and remained within the RBI’s policy projection of 24-25 per cent.
The growth in loans to commercial real estate remained high, albeit with some moderation. On currency movement, the RBI said that rupee moved in the range of Rs 39.26 to Rs 43.15 per US dollar during 2007-08. “The exchange rate of rupee was Rs 39.99 per US dollar on March 31, 2008. At this level, the Indian rupee appreciated by 9 per cent over its level on March 31, 2007,” it said.
