Even as inflation fell to a 16-month low, Reserve Bank of India Governor Y V Reddy, on Friday, said the monetary policy will remain vigilant and pro-active to ensure global uncertainties do not affect the country's economic growth.
“Monetary policy in India would continue to be vigilant and pro-active in the context of any accentuation of global uncertainties that pose threats to growth and stability in the domestic economy,” Mr Reddy said at a function of the central bank of Sweden in Stockholm.
Policy preference
“The domestic outlook continues to be favourable and would dominate the dynamic setting of monetary policy in the period ahead,” he said. Mr Reddy said although inflation based on the wholesale price index (WPI) rose to above 6.0 per cent in early April 2007, it eased to 3.79 per cent by August 25, 2007. In his speech Mr Reddy said pre-emptive monetary measures since mid-2004, accompanied by fiscal and supply-side measures, have helped in containing inflation.
“The trending down of inflation has been associated with a significant reduction in inflation volatility which is indicative of well-anchored inflation expectations, despite the shocks of varied nature,” he said. It is important to design monetary policy such that it promotes growth by contributing to the maintenance of financial and price stability, he said.

FOOD PRICES A CONCERN: FM

New Delhi, PTI:  Finance Minister P Chidambaram, on Friday, expressed happiness over the fall in inflation to a 16-month low, but said prices of essential food items should decline further.
“It is a cause for happiness. It is a cause for concern,” Mr Chidambaram said when asked about decline in inflation.
 “This shows good macro management. I have been saying whatever steps have been taken from time to time have yielded good dividends,” he said.
Asked about the possible future trend on inflation, he said there was need for caution as international crude oil prices have reached $74 per barrel. “Since crude oil prices are at $74 per barrel... so the outlook is of caution,” he told reporters.
Mr Chidambaram also said that prices of essential commodities could only come down if supplies were augmented.
“That can only happen if the demand-supply mismatch is addressed. We have to address the supply side issues of pulses, food, oilseed, and vegetables,” he said.
“Ultimately, the homemaker’s concerns about prices of essential commodities needs to be addressed,” he added.
Mr Chidambaram told reporters that outlook on inflation is of caution, given that international crude oil prices have reached $74 per barrel.