RBI likely to ease policy, focus on balancing growth and inflation: Subbarao

The Reserve Bank of India is likely to begin easing monetary policy to address concerns about economic growth, Governor Duvvuri Subbarao said in a BBC interview, reiterating comments made by the RBI when it kept rates unchanged on December 16.

“From here on, we could expect reversal of monetary tightening. But it’s difficult to say when that will take place and in what shape it will roll out,” Subbarao said in an interview published on the BBC website on Monday.

The RBI raised its key interest rates 13 times since March 2010, but kept rates on hold on December 16 and sent a strong signal that its next move was likely to be an easing.

[caption id=“attachment_169811” align=“alignleft” width=“380” caption=“The RBI governor has said the focus in 2012 will be on balancing growth and inflation.”] [/caption]

Subbarao reiterated that growth was likely to be a bigger concern in 2012, although the risk of inflation remained, largely because of a weakening rupee.

“It is just that (through) much of 2011, inflation was so high that we had to give higher priority to inflation,” Subbarao said. “But going forward we acknowledged that growth is going to be a concern. In fact, in the December statement, we said growth is a serious concern, so I think the balance between growth and inflation will shift in 2012,” he said.

In October, the RBI lowered its growth forecast for the Indian economy to 7.6 percent for the current fiscal year ending March from its previous forecast of 8.0 percent.

Reuters