Though the Reserve Bank of India (RBI) will continue to take determined and calibrated measures with a focus on managing inflationary expectations, governor Yaga Venugopal Reddy has cautioned that the high energy prices may not necessarily be temporary and the country has to adjust itself with the new scenario.
Inflation hit 11.05% earlier this month, the highest in 13 years, leading to concerns of further policy action to tame prices.
?The whole economy and indeed our society are better off adjusting to the possible new reality of high and volatile energy prices. RBI?s effort is to smoothen and enable this adjustment to a new reality so that inflation expectations are contained,?? said Reddy, while addressing bankers at a convocation meet organised by the National Institute of Bank Management at Pune.
?The RBI may have to build on actions already taken. RBI will play its part in moderating and managing aggregate demand so that pressures on prices are not intensified,? he said. The governor said he had called on the finance minister and the Prime Minister on Saturday to discuss the emerging inflation scenario and the bank would now make an internal assessment to consider its stance.
Reddy said he did not see any adverse impact of inflation on growth as of now. ?We, on the basis of current information, don?t come to the conclusion that managing this problem will necessarily involve sacrificing growth. As of now, we don?t see any reason to jump to the conclusion that growth will be adversely affected,? he said. He expressed confidence that with a well-managed smooth adjustment, inflation would be brought in alignment with the aim as expressed in the April credit policy.
?We are safe in regard to the financial sector and the outlook is optimistic on the food front. Therefore, as of now, fuel prices are the main, though a difficult, problem,? he said.