Hawkish stance on interest to stay: RBI

Speaking to reporters, on the sidelines of Fkcci meet here, RBI Deputy Governor Subir Gokarn, reiterated RBI’s continued efforts to fight inflation. There were visible signs of commodity prices moderating and domestic demand picking up appreciably to warrant rethinking in RBI’s strategy, he said.

Stating that the EU and US debt crisis so far has had only moderate influence on country’s economy, he said, the central bank was keeping an eye on the global happenings and its (RBI’s) initiatives would be such that it would translate into cushioning any ill-effects of them. RBI is still to assess the impact, if any, of the global developments on the Indian economy.

“We have to be watchful and not lapse into any false sense of comfort. We should not be carried away by hype be it positive or negative,” he said stressing the need to live “in a period of high volatility and long uncertainty,” adding RBI, cannot but make a trade off between growth and inflation when it comes to sticking with its principle role of taking steps to stem rising prices.

“The current level of headline inflation was more or less in the range as per RBI projections,” he said, adding only food inflation was still worrisome at the moment unless supply-side contraints are addressed adequately and in robust manner to tame it.

Further, he said, the growth projections of RBI would remain and that they would take a call only at the next review meeting slated in October, 2011.  In this regard, he said, unless foreign investors see credible signs of inflation easing they are bound to shift their funds  to attractive markets. “Once investors see cooling of situation in domestic markets in emerging economies, they are bound to return and countries like India and China are no exception,” he added.

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