Inflation may have hit a nine-month low of 7.45 per cent in October, but concerns over price rise have not ended.

K.C. Chakrabarty, Deputy Governor of the Reserve Bank of India, said that inflation cannot come down all at once.

“It (inflation) is today at (around) eight per cent. It will not come down at one go. It will go down gradually,” he said on Friday after meeting the Chief Ministers of the northern States.

On Thursday, Chakrabarty had indicated that rate cuts would depend on inflation. However, the 7.45 per cent inflation in October is way above the central bank’s comfort level of four to five per cent. Further, RBI has revised its fiscal-end inflation projection to 7.5 per cent from seven per cent earlier.

RBI is under pressure from various quarters, including the Finance Ministry, to ease interest rates to boost growth.

Even as the central bank refrained from decreasing interest rates in its half-yearly monetary policy review in October, it has lowered cash reserve ratio, thus, infusing Rs 17,500 crore into the economy.

Later, while inaugurating the RBI stall at the India-International Trade Fair, Chakrabarty said that at a time when “the financial system is under stress, growth has taken a hit,” one must focus on the small and medium enterprises (SMEs).

Towards the end of October, RBI, which is keen on advancing easy and timely credit flow for SMEs, had asked banks to study the issues related to financing for this segment.

According to estimates, the SME sector contributes 45 per cent of industrial output and 40 per cent of exports.

> aesha.datta@thehindu.co.in

Related Topics