RBI concerned over rising inflation rate

Mumbai, Jan 31: Concerned over the rising inflation, the Reserve Bank Of India (RBI) Governor Dr Yaga Venugopala Reddy today said bringing inflation back in the range of 5-5.5 per cent tops the agenda of the Central Bank.

Talking about the highlights of the third quarterly review of the annual statement on monetary policy, he said inflation would be brought down as close as possible to 5.0-5.5 per cent at the earliest, while continuing to pursue the medium-term goal of a ceiling on inflation at 5.0 per cent.

Charting out his future plans over the remaining part of the year to curb inflation, Dr Reddy said ''Management of liquidity would receive priority in the policy hierarchy. Consequent upon the tightening of market liquidity, the impact of monetary policy is expected to be stronger than before''.

The central bank would use all policy instruments, including the CRR, to ensure the appropriate modulation of liquidity in responding to the evolving situation, he said.

Briefing the media after the declaration of the third quarterly review here, the RBI Governor said ''Containing inflation is a pro-growth policy''. The central bank has raised its key lending rate by 25 basis points to 7.50 per cent, leaving its borrowing rate or reverse repo rate and bank rate unchanged at 6.00 per cent each.

However, he said ''There was an issue of supply-management in certain areas in the country's market which was behind the nflationary pressure''.

Inflation, neasured by variation in the wholesale price index (WPI) on a year-on-year basis, increased to intra-year peak of 6.1 per cent on January 06 before marginally declining to about 6.0 per cent a week later. Whereas the real gross domestic product (GDP) increased from 8.9 per cent in the first quarter to 9.2 per cent in the successive quarter of the current fiscal. Accordingly, the real GDP growth for the current year is expected to be in the range of 8.5-9.0 per cent as compared with 8.0 per cent projected earlier, the Governor said.

Meanwhile, the central bank has restrained the banks from granting fresh loans, in excess of Rs 20 lakh, against NRE and FCNR (B) deposits and advised them not to undertake artificial slicing of the loan amount to circumvent the ceiling, he said. In reply to a media query, he said ''Time has come to improve bank rate''.

The RBI has kept it unchanged at 6.0 per cent during its third quarterly review. He informed that technical work on it has already begun at RBI. Also, he said the Central Bank is likely to come up with a paper on the topic in the near future.

UNI