Reserve Bank of India Governor D. Subbarao on Thursday said inflation might trend lower from the beginning of the January-March quarter.
Though inflation has come down from its peak, the current level of 7.5 per cent was still high.
“We in the RBI are always managing balance between growth and inflation. Growth has certainly moderated to 5.3 per cent during the July-September quarter. At the same time, inflation at 7.5 per cent is still high,” Subbarao said at a press meet after the central bank’s board meeting in the city today. The Governor also held a meeting with the representatives of State Level Bankers’ Committee after the board meet.
The central bank, which will announce its mid-quarter policy on December 18, will take into account the growth-inflation trajectory and calibrate its monetary policy accordingly, he said. “We expect it (inflation) to trend down starting the fourth quarter of this fiscal,” he added.
The headline inflation rate, based on the wholesale price index, rose an annual 7.45 per cent in October. Despite the slowing growth rate, RBI has refrained from lowering rates following sticky and elevated inflation.
Responding to a query on the impact of direct cash transfer scheme on inflation, he said, it was unlikely to push up inflation.
Subbarao said there was no commitment to revise inflation target, clarifying his recent comments made at a panel discussion on the occasion of the silver jubilee celebrations of the RBI-promoted Indira Gandhi Institute of Development Research.
The panel also included two former RBI Governors, Y.V. Reddy and C. Rangarajan. Having listened to their view points, Subbarao suggested that RBI would review what they had said internally.
“Within the RBI we will see if we need to change our strategy. However, there is no commitment that we are actually going to change it,” he clarified.
Talking about asset quality, RBI Deputy Governor K.C. Chakrabarty said, “Asset quality of banks has deteriorated. Banks should improve risk management practices and try to improve asset quality.”