RBI must take monetary action, says Pronab Sen

“If RBI is signaling a concern about inflation, and if inflation continues to accelerate, they will certainly do something,” Pronab Sen told Reuters in an interview. The RBI will review its monetary policy on April 20.

Sen, however, declined to specify what policy actions were required, saying it was for the central bank to decide.India’s four-month spell of wholesale price inflation above the RBI’s perceived comfort zone of 5 per cent prompted the central bank in March to unexpectedly hike its key lending rates by 25 basis points. The Reserve Bank last month warned of inflationary pressures from higher capacity utilisation and rising commodity and energy costs.

Sen said WPI inflation in March was likely to be higher than February’s 9.89 per cent, partly due to a low base effect. Headline inflation could start easing from April when the base effect starts wearing off, he added, noting that food price inflation has already started moderating.

Non-agricultural inflation
Sen said non-agricultural inflation was still accelerating. Sen also said consumer price inflation was expected to come down below 10 per cent by May.  The chief statistician said industrial output growth was expected to remain between 15-16 per cent in February and March compared to 16.7 per cent growth in January. Sen said the 7.2 per cent estimate for gross domestic product for the financial year 2009/10 would be revised in May, but said it was too early to say whether it could be revised upward. The central bank has estimated that the Indian economy was likely to grow by 7.5 per cent in 2009/10.