Managing recovery is now our focus: RBI


"At present, the focus around the world and also in India has shifted from managing the crisis to managing the recovery," RBI Executive Director Deepak Mohanty said on Friday.
He said the key challenge is withdrawing soft monetary policy that was initiated to weather the financial crisis.

"The key challenge relates to the exit strategy that needs to be designed, considering that the recovery is as yet fragile but there is an uptick in inflation, though largely from the supply side, which could engender inflationary expectations," he said.

Mohanty said that the RBI has initiated the first phase of exit in its October 2009 review of monetary policy in a calibrated manner mainly by withdrawal of unconventional measures taken during the crisis.

In its October monetary review, the RBI raised the requirement for banks to hold portion of the deposits in cash, gold and government securities by one percentage points to 25 per cent.

It had also done away with special liquidity provision for banks to provide money to mutual funds and others. "This should help anchor inflationary expectations by reducing the overhang of liquidity without jeopardising the growth process as market liquidity remains comfortable," he said.

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