RBI sees inflation risks, limited room to ease policy

MOSCOW Sat Feb 16, 2013 5:09pm IST

Reserve Bank of India (RBI) Governor Duvvuri Subbarao attends the monetary policy review meeting in Mumbai January 24, 2012. REUTERS/Danish Siddiqui/Files

Reserve Bank of India (RBI) Governor Duvvuri Subbarao attends the monetary policy review meeting in Mumbai January 24, 2012.

Credit: Reuters/Danish Siddiqui/Files

Related Topics

MOSCOW (Reuters) - 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.

(Reporting by Katya Golubkova, Maya Dyakina and Shamik Paul; Editing by Douglas Busvine)

FILED UNDER:

Telecom

Reuters Showcase

Insurance Bill

Insurance Bill

Opposition support bolsters prospects for insurance reforms  Full Article 

SBI Share Sale

SBI Share Sale

SBI's up to $2.4 billion share sale likely by end April - sources   Full Article 

Eicher Share Sale

Eicher Share Sale

Truck maker Volvo sells shares in Eicher Motors  Full Article 

Beef Ban

Beef Ban

After beef ban, Hindu groups force abattoirs to close   Full Article 

Monsoon Season

Monsoon Season

Exclusive - India expects better monsoon rains this year  Full Article 

Services Growth

Services Growth

Services growth at eight-month high in Feb - HSBC PMI  Full Article 

'India's Daughter'

'India's Daughter'

Documentary on 2012 Delhi gang rape banned in India  Full Article 

Capex Slashed

Capex Slashed

Cairn India slashes 2015-16 capex on falling crude   Full Article 

Reuters India Mobile

Reuters India Mobile

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