RBI action likely if inflation rises too fast: Basu

April 13, 2010 06:29 pm | Updated November 12, 2016 05:37 am IST - Mumbai

Some more tightening of the monetary policy can be expected from the Reserve Bank if inflation rises across-the-board, chief economic advisor Kaushik Basu said here on Tuesday.

“The inflation figure in March will be on the higher side. But if the rise is across-the-board, some tight monetary measures can be expected from the Reserve Bank,” Mr. Basu told reporters on the sidelines of a function here.

He also said that “the higher IIP index will not increase fears of inflation.”

According to Mr. Basu, it is expected that March inflation will be high. From July onwards, however, inflation will become very low, he said.

“The base effect will come into play in the next three months. From July onwards, it will be very low,” he said.

An average monsoon would help in alleviating inflation but if there is a drought like last year, then there would be some upward pressure on prices, Mr. Basu pointed out.

On the fast rising rupee, which has been impacting IT companies and exporters, Mr. Basu said, the rupee rise is good news in one way as it means more inflows which shows the country as a good investment destination. The situation, however, needs to be monitored carefully, he said.

He, however, cautioned against any policy measures to tame foreign fund flows saying, “don’t temper with inflows with legislative kind of restrictions or with some market operations, or with some sterilisation measures,” as such measures will send out bad signals. He also praised RBI for managing the currency exchange fluctuations very well.

On the macro-front, he said the government is committed to reducing total debt to 68 per cent of GDP by 2015 from the high 82 per cent at present.

“It was a commitment we did in our budget that we will reduce our total debt to 68 per cent of GDP in the next five years. So, all the global rating agencies have given a better rating for us due to this budgetary commitment,” he said.

At present, the country’s debt is a high 82 per cent of the GDP according to the estimate of the International Monetary Fund and 77-78 per cent according to the government estimate, the chief economic advisor said

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.