TODAY'S COLUMNIST

Adjust demand to reduce price shock

Dominique Dwor-Frecaut
Posted: Thursday, May 29, 2008 at 2105 hrs IST
Updated: Thursday, May 29, 2008 at 2105 hrs IST

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: end of March. At $314 billion they are more than comfortable and India’s external liquidity position remains strong. But flat forex reserves suggest capital inflows have slowed, which has reduced the scope for appreciating the rupee. The risk is that without rupee appreciation, the burden of containing inflation could fall on interest rate policy alone. In such an instance, stabilizing inflation against a backdrop of high and rising energy prices could require multiple rate hikes.

—The author is an economist with ABN Amro. She has worked with IMF and World Bank. These are her personal views...

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