Domestic factors crucial for monetary policy: Reddy

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Mumbai, Jan 29 (UNI) Reserve Bank of India (RBI) Governor Y Venugopala Reddy today emphasised that the US Federal Reserve rate cut need not be a necessary governing factor for any change in the Indian monetary policy.

Batting a volley of questions on the issue at a post press conference on the third quarter monetary policy review announcement, Dr Reddy explained at length that though such cuts be considered as one of the factors in determining the policy, it could not be considered a major one.

Dr Reddy said ''India's own experience is much different in the past with domestic determinants at macro level dominating over external factors.'' He stressed that the monetary policy was dependent much on the functioning of the domestic economy, which currently was on a stable mode.

At macro level, the circumstance in the US was totally different to that of India. Moving forward, he said that while the US economy was showing a tendency of economic slow down, India continued to be the second fastest growing economy despited a moderate economic growth. The financial institutions in the US were facing the liquidity crunch, whereas in India liquidity was abundant.

''The need for the monetary policy was to put greater emphasis on maintaining the balance between supply and demand.'' Hence the Apex bank extended the emphasis more on liquidity management and price stability. He said the RBI would also emphasis on credit availability as well as credit delivery, in particularly for employment intenstive sectors while pursuing financialinclusion.

However, he said that the RBI would continue to monitor the evolving heightened global uncertainties and domestic situation impinging on inflation expectations, financial stability and growth momentum to respond swiftly with both conventional and unconventional measures as appropriate.

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