Not just WPI inflation, other factors will also shape RBI's policy action

Mumbai:The RBI will factor in all indicators, including the recent cooling off in the wholesale price-based inflation, to decide on the policy action at the upcoming monetary review, Deputy Governor K C Chakrabarty said today.

"It's not only the WPI inflation but many other variables. The RBI has to make a balance and the balancing act is judgemental and not a formula-based thing," Chakrabarty said, adding the central bank will take a call taking into account all relevant data points.

The RBI deputy governor was speaking at a banking conference organised by the Indian Merchants Chamber here.

 Not just WPI inflation, other factors will also shape RBIs policy action


The central bank will announce its mid-quarter review on June 17. Analysts are eyeing a 0.25 per cent reduction in the lending rates considering a slew of factors.

These include the fall in growth to a decadal low of 5 percent and a more-than-expected improvement in fiscal deficit to 4.9 per cent last fiscal against a projected 5.2 per cent, and steadily falling core and headline inflation numbers.

Notably, the RBI has been citing a host of issues - high fiscal and current account deficits, supply side issues, rural wage spikes, increasing protein consumption, among others - in recent years in its fight against inflation.

While core inflation is under 3 per cent, headline price index has slipped below 5 per cent in April and there is also a downward trend in consumer inflation which has fallen below 10 per cent.

With increasing divergence between WPI and CPI, the central bank had earlier also said all relevant indicators are taken into consideration for the credit policy review.

The apex bank had also flagged off concerns like high current account deficit, saying it would also be one of the major factors in its future decision making.

Referring to opening of bank accounts for every citizen, Chakrabarty said a larger number of banks would help in increasing the reach of the banking system.

He added a higher number of people in the banking fold would support overall growth.


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Updated Date: Dec 20, 2014 19:13:00 IST