As is customary, ahead of the credit policy review on March 15 and the Union Budget for 2012-13 the day after, Reserve Bank of India Governor D. Subbarao on Wednesday met Finance Minister Pranab Mukherjee to discuss the overall macroeconomic environment at home and abroad, with special reference to the high inflation scenario in the wake of a spike in international oil prices, low growth and crunch in liquidity.
The meeting, according to informed sources, was more significant than just a standard practice call-on by the RBI Governor prior to monetary policy review as the chances of inflation inching up again remains a possibility.
The added significance is owing to the fact that Congress President Sonia Gandhi has felt that inflation too, could have been one of the reasons for the party's poor performance in the Assembly elections.
Mr. Mukherjee, on his part, has been asserting time and again that although inflation has been on a declining trend in recent months, it is still not down to an ‘acceptable' level and needs to be tamed further.
With RBI's ‘comfort zone' for inflation way down at about 4-5 per cent, the most likely announcement by the apex bank on March 15, according to economic analysts, would be a further cut in the Cash Reserve Ratio by
about 50 basis points at the least to tide over the liquidity crunch.
Keywords: Union Budget, Cash Reserve Ratio, inflation
