Sonia's concerns on inflation may weigh on RBI monetary policy

Sonia's concerns on inflation may weigh on RBI monetary policy

With Congress President Sonia Gandhi citing inflation as one of the reasons for the party's poor performance in state polls, the government may signal RBI to maintain its priority to containing price rise in the monetary policy on March 15.

In her first interaction with the media after election results came out, Gandhi said "inflation, too, could have been one of the reasons" for the party's poor performance.

The Congress, she added, will have to "pull up its socks" for the coming electoral battles in several other states.

The Assembly polls are due in Gujarat and Marchall Pradesh this year. Kant, Madhya Pradesh, Chhattisgarh, Rajasthan and Delhi are due for elections in 2013.

Incidentally, Reserve Bank of India (RBI) Governor D Subbarao today had a meeting with Finance Minister Pranab Mukherjee here and is believed to have discussed the economic scenario, including inflation.

Mukherjee has been stressing that inflation, which has moderated in the past few weeks, still needs to be brought down. For RBI, the comfortable level of inflation would be 4-5 per cent.

After remaining at near 10 per cent last year, the wholesale price-based inflation in January softened to 6.55 per cent. The retail inflation was 7.65 per cent.

After following a tight liquidity policy since March, 2010 to check inflation, the RBI started relaxing its stance by releasing more money into the system with the expectation that banks would cut interest rates.

In view of the growth sliding to a three-year low of 6.9 per cent in 2011-12 (as per advance estimates) growth, the industry and economists have been demanding a cut in interest rate to boost demand.

The price rise was one of the major issues in the state elections.

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