RBI hints at policy rollback

The Reserve Bank of India (RBI) could look at rolling back its expansionary monetary policy, which it started as the nation’s economy was hit by the global financial meltdown and a local industrial downturn, reports HT Correspondent.

The Reserve Bank of India (RBI) could look at rolling back its expansionary monetary policy, which it started as the nation’s economy was hit by the global financial meltdown and a local industrial downturn.

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“The current monetary and fiscal stance is not the steady state. The Reserve Bank needs to roll back the special monetary accommodation,” RBI governor Duvvuri Subbarao said in his JRD Tata Memorial lecture organised by the Associated Chamber of Commerce and Industry (Assocham) on Friday.

However, RBI will continue to pursue an accommodative monetary policy until economic conditions improved, he added, while signalling a need to reverse expansionary policies.

The challenge for the Reserve Bank was to maintain a comfortable liquidity situation while at the same time anchoring inflation expectations, he added.

Subbarao said that the increased fiscal deficit, which the Centre this fiscal year projects at 6.8 per cent of the gross domestic product, would pose “more than a proportionate challenge” on the monetary side.

Subbarao also said that the increased fiscal deficit would pose “more than a proportionate challenge” on the monetary side.