RBI must take careful call on monetary policy, says Montek

The Reserve Bank of India (RBI) is widely expected to raise its key lending rate by 25 to 50 basis points in April when it meets to review monetary policy as it continues steps to roll-back stimulus measures. “Clearly inflation is become closer, much more into worrying area. Secondly, we’re much more confident growth is picking up,” he told reporters.

“What is the balance between controlling inflation and protecting growth, is an issue which the people responsible for short-term monetary policy have to take a look at,” Ahluwalia said.

Asked if strong growth and high inflation made a case for RBI to return to a normal monetary policy, Ahluwalia said: “That is an issue I want the RBI to consider very carefully and I’ve no doubt they will make the right decision.”

He declined to say what he thought RBI would decide during its April review meeting, adding inflation was a concern and needed to be brought down, but dismissed concerns of prolonged period of double-digit inflation. “Over the next two months, I expect to see inflation coming down.”