Timing of easy policy exit a challenge: RBI

GOA: The timing and sequence of exit from an easy policy is still a challenge, Reserve Bank of India Governor Duvvuri Subbarao said on Monday.

Subbarao, who was speaking at a conference in Goa, also said the challenge was to support growth without compromising price stability.

The Reserve Bank of India will review monetary policy on January 29.

The Reserve Bank may squeeze the money supply to tame inflation, which jumped to over seven per cent in December on surging food prices, economists said.

"The fact that wholesale price index inflation has gone up beyond seven per cent causes some concern. If it stays at that level, I think sooner rather than later the RBI will have to take a call," Partha Sen of Delhi School of Economics said after pre-Budget meeting with Finance Minister Pranab Mukherjee.

Former Chief Economic Adviser Nitin Desai said that the focus of the meeting was on revival of growth and controlling inflation.

"The focus was very much on how to maintain the revival of growth but also very much on inflation. Concern about the needs to address inflation (was raised)," he added.

National Institute of Public Finance and Policy Director Govinda Rao said the supply side management should be done, and then RBI has to tweak cash reserve ratio, the amount that banks keep with the RBI.

Rao is also a member of Prime Minister's Economic Advisory Council.

PMEAC Chairman C Rangarajan had said, "...Some monetary actions are also called for, particularly for reducing the liquidity in the system."