Mumbai, Jan. 31: A confident Reserve Bank governor Bimal Jalan today said the Indian economy is resilient enough to tackle any kind of external or internal impact, implying that neither drought nor the current US-Iraq standoff will be able to throw the country out of gear.
Spelling out the major concerns that have kept the country’s capital and money markets on tenterhooks in recent times, the governor said despite drought, flaring oil prices and a possible US-Iraq war there is no threat of inflation, food shortages or balance of payments problems. Jalan was speaking to newspersons after inaugurating the annual conference of the Fixed Income and Money Market Dealers Association.
“The rise in oil prices will have a marginal impact on inflation but we will be able to handle it,” he added. While ruling out an immediate cut in repo rate, Jalan reiterated the central bank’s policy to pursue a soft interest rate regime.
The bond markets have been anticipating a cut in the repo rate following the huge liquidity and strong forex inflows.
The governor also replied in the negative when asked if there were any plans for a sovereign bond issue (dollar denominated bonds). “To the best of my knowledge, there are no such plans,” he said.
Referring to the domestic bond markets, he said that though the market is liquid, the number of players and volumes are narrow. Further, nearly 80 per cent of government securities were owned by government institutions like banks and LIC.