RBI seeks economists' views as inflation worries persist

Tue Apr 10, 2012 8:43pm IST

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai January 11, 2011. REUTERS/Stringer/Files

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai January 11, 2011.

Credit: Reuters/Stringer/Files

Related Topics

REUTERS - The Reserve Bank of India (RBI) on Tuesday reiterated its concerns on inflation and a widening current account deficit in a meeting with economists a week before its annual monetary policy review, according to two economists who were there.

A Reuters poll of 20 economists issued on Tuesday showed the RBI is expected to cut rates for the first time in three years to give a boost to slowing growth, although the continued risk of inflation is seen squeezing the room for rate cuts.

"Going by the risks highlighted, the monetary policy response could be muted," an economist present at the meeting told Reuters, declining to be identified because the meeting was off-the-record.

"The RBI wanted to solicit our view on the growth situation and they wanted to know the impact of a rate cut on the investment scenario," the economist said.

Investment in India has slowed in recent months, in part because of high borrowing costs after 13 interest rate increases between March 2010 and October 2011.

Last week, the RBI met with top bankers and primary dealers as part of its series of meetings ahead of its annual policy release.

India's balance of payments slipped into negative territory for the first time in three years and the current account deficit widened to $19.6 billion in the December quarter as exports slumped and imports rose.

"The RBI gave an overview of the economy, highlighting concerns to both inflation and growth, which seemed nothing different from their last policy review," said another economist who attended the meeting.

In its mid-quarter policy review in March, the central bank left rates unchanged and warned of resurgent inflation risks, a hawkish stance that disappointed investors hoping for the first rate cut since April 2009.

India's February headline inflation, which is based on the wholesale price index, picked up for the first time in five months to 6.95 percent from a year earlier after a spike in vegetable prices fanned food inflation.

Many economists have scaled down their expectations for rate cuts this year in India, given worry about inflation and high global oil prices.

(Editing by Tony Munroe)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
n2012 wrote:
create more agricultural supply side infrastructure is one step to aid growth without putting pressure on prices. find more ways.

Apr 10, 2012 8:55pm IST  --  Report as abuse
n2012 wrote:
Involve private players in agriculture infrastructure and produce creation with regulations or in a limited manner – so that profit motive does not become the prime motivation.

Apr 10, 2012 8:56pm IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India Economy

REUTERS SHOWCASE

Reliance Projects

Reliance Projects

Exclusive: Reliance plans $13 billion projects including new refinery.  Full Article 

Pharma Sector

Pharma Sector

In race for bigger margins, drug makers willing to lose the India "advantage".  Full Article 

Low Stocks

Low Stocks

Indian power station coal stocks lowest since 2012 blackouts.  Full Article 

Markets This Month

Markets This Month

Tata Motors, M&M top Sensex gainers  Full Article 

Google Drones

Google Drones

Google is testing unmanned drones to deliver anything from dog food to medicine.  Video 

#RiceBucketChallenge

#RiceBucketChallenge

In India, rice replaces ice in bucket challenge.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage