RBI to take prompt action if inflation demand driven

Company Secretary and Compliance Officer

Thursday 10 December, 2009.

RBI to take "prompt action" if inflation demand driven: Dy Guv

Amid rising food inflation, the Reserve Bank today said it will take "prompt action" if it felt the price rise is due to demand factors.


"We have no evidence that food inflation is due to demand related factors. The moment we feel that demand is also playing a role, RBI will take prompt action," RBI Deputy Governor K C Chakravarty said.

In the context of food inflation he said, the apex bank did not have monetary response as long as the rise in prices was due to supply related factors.

Food inflation rose to over 17 percent in the third week of November from 15.58 per in the previous week.

A day ahead of the meeting of its central board of directors in Kolkata on Thursday, he added that, "the present monetary stance will continue till the RBI feels that it should be changed.

On asset price inflation, he said was also not due to demand-related factors.

"In one or two cases, we felt that demand played a role as in the case of real estate for which RBI had tightened the policy. If needed, RBI would do more," he said.

Saying that India would have to grow at least by 10 percent over the next 20 years, or else things would be difficult to manage, Chakravarty said the main challenge before the economy was to improve productivity and efficiency.

On distributing smart cards to villagers who did not have any bank account, he said that 60 percent of the population in the country did not have any access to the banking system.

To achieve full financial inclusion, he said it was imperative that the whole population be brought under the ambit of the banking system.



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