The Reserve Bank of India (RBI) may consider withdrawing excess liquidity in the system to tame high inflation at its monetary policy review, veteran economist and former Head of Prime Minister's Economic Panel, Suresh Tendulkar, said in Mumbai.
The Reserve Bank will review its monetary policy on January 29.
"The RBI may consider withdrawal of excess liquidity in the system, but concerns over large Government spendings would continue to weigh," Tendulkar said.
Rising inflation is largely driven by food prices and there is need for accelerating imports and supply enhancement thorough all possible ways, Tendulkar said on the sidelines of a conference in Mumbai.
"The monetary policy does not have a major role to play in combating inflation but as a signalling move, RBI may look to contain liquidity by opting for a hike in banks' Cash Reserve Ratio (CRR)," Tendulkar said, adding that there was no room for the central bank to change its key policy rates.
Tendulkar said that the economy is expected to grow about 7.5-8.0 per cent in 2009-10.