Commenting on the current inflationary trends with the WPI crosssing the 11 per cent mark, Dr Reddy speaking on the sidelines of the fifth convocation of the National Institute of Bank Management here, admitted that there is a legitimate concern about the recent development and the RBI was in the ''midst of intensive examination of issues and options. ''In the process of difficult adjustment, the RBI will play its part in moderating and managing aggregate demand so that pressures on prices are not intensified'' he added.
He said ''Our financial and external sectors are strong, efficient and resilient to manage the adjustment process'' and called upon market participants, in particular the financial market participants to appreciate the problem and join the RBI in managing demand and maintaining orderly conditions in financial markets, while drawing upon the strengths of their respective balance sheets.
He said the RBI will continue to focus on managing expectations and on enabling adjustments in the economy in response to the oil shock. Dr Reddy said the present oil price shocks are not going to be on a continuous basis.
In fact, there would be some pressure due to pass through of oil prices. Stressing that RBI's effort is to smoothen and adjust to the new reality of energy prices to contain inflation, he said, ''we will continue to take determined measures, with a focus on managing expectations.'' On growth, the RBI Governor said, ''the supply-demand situation in India is good. There is no reason to jump to the conclusion that growth will be adversely affected. Whether interest rate will have an impact on growth, will have to be ascertained. The financial markets are safe, resilient and strong enough to manage the adjustments required.''