RBI governor D. Subbarao in Calcutta on Thursday. Picture by Sanjoy Ghosh
Calcutta, Dec. 6: India’s inflation is likely to trend lower during January-March, Reserve Bank of India governor Duvvuri Subbarao said on Thursday, a month after he had indicated that the central bank might ease monetary policy as early as January.
“It (inflation) has come down from its peak, but at 7.50 per cent, inflation is still high,” he told reporters after the RBI’s board meeting in Calcutta.
“We are expecting that inflation will trend down starting the fourth quarter of this fiscal year. As we go into our mid-quarter policy on December 18 and the quarterly policy on January 29, we will take into account the growth-inflation trajectory and calibrate our monetary policy accordingly.”
“Growth has moderated from 6.5 per cent last year to 5.5 per cent and 5.3 per cent, respectively, in the first two quarters of the fiscal,” he said.
The RBI projects the wholesale price index at 7.5 per cent at March-end, after revising the projection upwards twice earlier this year.
The RBI, which was a hawkish outlier long after many central banks began loosening policy, has refrained from lowering rates following sticky and elevated inflation since the April rate cut despite slowing growth.
However, pressure from government and industry bodies has mounted over the last few months to cut policy rates because of the sharp slowdown in economic growth.
The RBI governor also pointed out that the government’s policy to provide direct cash transfers would have no impact on inflation.
Chit funds in Bengal
On the mushrooming of chit funds in Bengal, the RBI governor said the onus of preventing the growth of such “multi level marketing” companies lay with the state.
Pointing out that the RBI could not directly regulate such institutions, Subbarao said all states had been made aware of the operations of such institutions and were requested to take appropriate legal action.
“It is the responsibility of the state government to prevent and prosecute the culprits,” Subbarao said, adding that the apex bank was providing training services to police personnel at district levels in order to check in on such chit fund companies.
When asked about the RBI governor’s comments on chit funds, Bengal finance minister Amit Mitra refused to answer. “The RBI governor has made the comment, ask him,” Mitra said.