Balancing inflation with growth tough: RBI

MUMBAI: It is a challenge for the Reserve Bank to meet demands of economic growth and rein in surging inflationary pressures, governor Duvvuri Subbarao said on Monday , hinting that it will be a tight-rope walk for the central bank on January 25 when it announces its quarterly policy review.

“Though we recovered faster from the (global) crisis, inflation also caught up with us sooner than others. For the Reserve Bank, the challenge is to calibrate monetary policy taking into account the demands of inflation management and the demand of supportive recovery ,” Subbarao said.

“A lot of other countries are still flirting with deflation ... and are still concerned that they might have deflation . On the other hand, we have a surging inflation,” he told students of the Indira Gandhi Institute of Development Research.

His comments come amid wide anticipation that the central bank in its third quarter monetary policy review on January 25 will raise the key policy rates by at least 25 basis points in the wake of soaring inflation.
High food inflation has been a major concern for the government. Rising food prices have pushed up inflation 8.43% in December last year.

Food inflation stood at a high level of 16.91% in the first week of January, after touching a 18.32% in the last week of December.

“When I meet other central bankers they tell me: ‘why don’t you give us a bit of your inflation so that our growth will be faster. That’s how desperately they want some inflation and how desperate we are to control our own inflation,” the governor said.