RBI Sees Inflation Risks, Limited Room to Ease Policy
February 17, 2013 1:43 PM EST
The Reserve Bank of India chief Duvvuri Subbarao struck a hawkish note on Saturday and said there are upside risks to inflation from food and commodity prices, while room for monetary easing is limited.
Headline inflation slowed to its lowest level in more than three years in January, but some analysts say the Reserve Bank of India (RBI) will watch the fiscal and current account gap and inflation risks before easing again.
"There are upside risks for inflation. In particular, food prices are going up as result of cyclical factors ... Then there is pressure on inflation from global commodity prices," Duvvuri Subbarao told reporters in Moscow.
The RBI cut its key policy rate for the first time in nine months in January, but struck a cautious note on further easing as it waits to see how the government's budget aims to bring a bloated fiscal deficit under control.
"At this moment there is room for monetary easing, but that room is limited ans we have to make a careful judgement on how to use that limited room," Subbarao said on the fringes of a meeting of Group of 20 finance ministers and central bankers.
India's high fiscal and current account deficits, in addition to inflation risks, are deterrents for further monetary easing, which is seen necessary to support sagging GDP growth.
The current account deficit widened to a record high of 5.4 percent of GDP in the September quarter, and Subbarao recently said it is likely to be at an all-time high in the fiscal year that ends in March.
In October, strained finances forced the Indian government to revise its fiscal deficit target for the fiscal year ending in March to 5.3 percent from 5.1 percent.
Most Popular Slideshows
- Flight MH17 Attack: Russians Claim 'Putin A Terrorist,' Memorial at Dutch Embassy Overflows [PHOTOS]
- Typhoon Rammasun Claims 18 Lives in China, Incurs $4.32B Losses (PHOTOS)
- Ellen DeGeneres Caught Cheating with Mutual Friend Before Portia de Rossi’s Rehab – Reports [PHOTOS]
- Malaysia Airlines MH17: Vital Black Boxes Finally Land in Hands of Malaysian Authorities, Rebels Announce Ceasefire (PHOTOS/VIDEOS)
Join the Conversation
- California Fruits Recalled in USA and Canada for Possible Listeria Contamination
- Malaysian Airlines Flight 17: Air Carrier Losing $1.6 Million/Day; Crisis Management Experts Suggest Hiring Risk Expert as CEO
- The IBM and Apple Merger: Will it Spell Trouble to Rival Companies
- CBA, NAB, Westpac in Fixed Rate War Offering Below 5% Interest
- Radio Australia Cuts to Affect Isolated Vanuatu Residents Who Rely on It for Weather Bulletins
- Samsung Galaxy Note 4 Apps Leak Online, Five Fresh Features to Expect from the Android Smartphone
- Moto 360 Price Speculations, Key Features, Strategic Release Date, Design: A Watch That is More Than Just Time
- Windows Phone 8.1 Update Rollout: 20 Nokia Lumia Phones Eligible and 13 New Features to be Added
- Three New Moto G Successors Spotted in FCC Document Dubbed Moto G2, Moto M and More --Reports
- HTC Google Nexus 8 Release Date Imminent with New Nexus 7 Deals, Two New Tablets Soon
- iPad Air 2 Release Date Will Skip IGZO Panel; To Rollout with Super-Slim iPad Mini Air
- Upcoming iPad Mini 3 Could be 30% Thinner and Likely be Called iPad Mini Air; Apple Q3 Results Show 9% Decrease in iPad Sales