The Hindu : Business : RBI keen on price stability: Rakesh Mohan

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Friday, Nov 23, 2007
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RBI keen on price stability: Rakesh Mohan

Special Correspondent

The apex bank will adopt all monetary measures

Adjustments in CRR, a continuing process
Maintaining growth with adequate provision of credit

NEW DELHI: Perturbed over the global rise in oil and food prices, the Reserve Bank of India (RBI) on Thursday made it clear that its prime concern was to maintain price stability and for which it would adopt all monetary measures that are deemed necessary.

Speaking at a business conference here, RBI Deputy Governor Rakesh Mohan said: “RBI’s main objective remains price stability, financial stability and maintenance of high growth through adequate provision of credit. We will use all monetary instruments as and when necessary [to meet that objective].”

FAO estimates

The Food and Agriculture Organisation (FAO) of the United Nations, Dr. Mohan said, had projected food prices to rise at a faster rate in the next five to ten years as compared to the past. The most adverse effect of this price rise, he said, would be on those economies that have a higher weightage for food items in the pricing index.

In India, food articles account for a weightage of 57 per cent in the consumer price index (CPI) and 26.94 per cent while including primary and manufactured food items in the wholesale price index (WPI), the pricing data that is used to measure point-to-point inflation.

Soaring crude

Referring to the soaring crude oil prices, Dr Mohan said the central bank would maintain its views as expressed in the mid-term monetary policy review on high oil and food prices.

He said that unlike the apex banks of certain other countries, “we have been taking action on prudential instruments to cool down certain sectors like housing and retail credit.”

Last month, for instance, the bank increased the cash reserve ratio (CRR) to suck out liquidity and help cool down credit offtake.

The RBI, Dr Mohan said, would tinker with the CRR, both upwards and downwards, depending on the monetary situation.

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