Policy to factor in low growth: RBI

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SummaryInflation is likely to trend lower during the quarter beginning January, Reserve Bank of India governor Duvvuri Subbarao said on Thursday.

Inflation is likely to trend lower during the quarter beginning January, Reserve Bank of India (RBI) governor Duvvuri Subbarao said on Thursday. He indicated a relook at the strategies and inflationary targets in the short term.

“We are expecting inflation to trend down starting the fourth quarter. As we go into the mid-quarter policy in December and the quarterly policy in January, we will take into account the growth inflation trajectory and calibrate monetary policy accordingly,” Subbarao said.

Reiterating his concerns on inflation Subbarao said, “We are trying to balance growth and inflation. Growth has moderated certainly. We were growing at 8.4% the year before and 8.5% last year. And 5.5% and 5.3% in the last two quarters. It has come down from its peak, but at 7.5%, inflation is still high,” he added.

The headline inflation rate, based on the wholesale price index, increased to an annual 7.45% in October. Taking cue from a panel discussion last week, Subbarao said, “We will review internally and see if we need to make any change in our strategy and inflationary target in the short term.”

In Kolkata for RBI’s board meeting, Subbarao said the regulator has asked state governments to tighten fists on chit funds operating under the banner of multi-level marketing companies. “The responsibility for checking that and prosecution for violation of the law is with the state governments. We have written to all state governments to be vigilant about this,” Subbarao said. The regulator has already conducted workshops with police departments on ways to check the proliferation of such companies.

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