*RBI may review easy money policy * **
** ** *‘Negative inflation not a concern’. * *Our Bureau * Pune, June 20 The Reserve Bank of India may look at reversing the easy money policy that it had adopted from September last following the global credit crisis. “We must recognise that reversing this expansionary policy is part of economic management. The RBI will reverse the expansionary policies at the appropriate time. I am not saying whether we will do it now or in the near future; but it certainly is on the agenda,” Dr D. Subbarao, Governor, RBI, said while speaking on the sidelines of the National Institute of Bank Management’s Sixth Annual Convocation here, on Saturday. Dr Subbarao said, “As part of crisis management, countries around the world had used an expansionary fiscal policy. Now, there are concerns and attention is being paid to reverse it. I think we must be looking at them as well.” Since mid-September 2008, the RBI has cut the repo rate by 400 basis points and the reverse repo rate by 250 basis points. The CRR was also reduced by 400 basis points. In fact, actual/potential release of primary liquidity since mid-September 2008 amounted to Rs 4,22,793 crore. On inflation, Dr Subbarao said that a negative inflation figure was not a concern going forward. “It must be read more as a statistical feature than a structural issue. India does not suffer a demand constraint and therefore there should be no concern about deflation. Even as the headline WPI index is negative, food article prices are spiralling up. The Consumer Price Index is still around 9 per cent. The RBI looks at a number of inflation variables, not just the WPI. We look at CPI, GDP deflator and inflation expectations and past trends”, he said. Stressing that growth is the top priority for the RBI, Dr Subbarao said that for India to get back to the high growth path, it was important that the benefits of fiscal stimulus package trickled down, credit flow increased and exports picked up. The stimulus packages had ensured ample liquidity. The RBI has managed the government borrowing in a non-disruptive manner and will continue to do so, he said. The impact of the stimulus measures taken by the government and the RBI was being felt in certain sectors such as cement, steel and coal, among others. “Two and three wheelers and passenger cars demand has revived. Cargo traffic and freight revenues have shown positive trends. It is not a complete picture and a number of sectors in the economy are yet to see a significant revival”, he said. The growth of 6.7 per cent in 2008-09 was much higher than what most people expected. It was largely in line with the growth number of 6.5-6.7 per cent that the RBI had projected in its Annual policy statement. “We will revisit our growth numbers as part of the quarterly review in July”, he said. http://www.thehindubusinessline.com/2009/06/21/stories/2009062151090100.htm --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
