Easing growth may lower inflation: RBI
The Reserve Bank of India (RBI) on Tuesday said the moderation of economic growth would help in containing inflation, which is still a cause for concern for policymakers as well as the common man.india Updated: Mar 21, 2012 02:15 IST
The Reserve Bank of India (RBI) on Tuesday said the moderation of economic growth would help in containing inflation, which is still a cause for concern for policymakers as well as the common man."Higher oil prices clearly play a role as does the currency movement, but there is also the growth moderation, which we are seeing, which might actually help contain inflation from the demand side," said Subir Gokarn, deputy governor, RBI.
In the short-term, food prices could also soften because of monsoons and other proposed initiatives announced in the budget by finance minister Pranab Mukherjee, he said.
“Food prices are going to play a role as we have some stabilisation and even softening, either because of monsoon in the short-term or because of initiatives of the government made quite explicit in the budget,” said the RBI deputy governor.
However, global crude oil prices touched $125 a barrel primarily due to the geo political uncertainty in major oil-producing countries in West Asia including Iran.
The government is also likely to raise prices of petroleum products due to high global crude oil prices, which may put pressure on inflation.
On the new consumer price index becoming a benchmark for policy action, he said, “I think we cannot make policy judgement on the basis of 2-months of new series. This is a series that shows some promise as the benchmark of inflation management, but it is too early in life to decide that we have put a heavy weight on it.”
“We are monitoring it. We are also analysing its dynamics in relation to other indices and at this point, it will become more important benchmark for us. It is too early to make a transition,” he added.