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Inflation still a matter of concern: RBI

business Updated: Oct 25, 2008 16:52 IST

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With inflation still in double-digits, the Reserve Bank has not tinker with key rates in its credit policy to push up growth as it has to balance price stability and growth.

"There are inflationary concerns (in the economy) even though in a mathematical sense, it is coming down...We have to balance the concerns of maintaining price stability and sustaining growth," Reserve Bank Governor D Subbarao told reporters here today.

After injecting Rs 1,85,000-crore liquidity into the banking system through various monetary and fiscal measures, including a 2.5 per cent cut in cash reserve ratio and a one per cent cut in key short-term repo rate in recent weeks, the Reserve Bank left its rates unchanged in the credit policy unveiled on Friday.

While the apex bank has lowered the growth rate to 7.5-8 per cent for FY'09, it has retained the earlier inflation target of lowering it to seven per cent by March-end.

Inflation continued to be a matter of concern as the RBI forecast is based on not merely the wholesale price index but also other data, he said.

"The RBI makes a deeper study and if one analyses the consumer price index, the CPI for agricultural and rural labour was up by 11 per cent and that for industry was up 9 per cent," he said.

Oil prices, though declining still continued to be volatile and kharif output, though promising, is forecasted to be lower, he said, adding that "a weakening rupee also adds to inflationary pressures."

The RBI has announced its monetary policy in the light of these concerns and balanced the need for financial and price stability while propping up sagging growth, he said.

Inflation fell to 11.07 per cent for the week ended October 11.

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