The Hindu : Business : RBI to take measured steps to contain inflation

Online edition of India's National Newspaper
Sunday, Aug 15, 2004

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RBI to take measured steps to contain inflation

MUMBAI, AUG. 14. The Reserve Bank of India today said it would take measured steps to contain inflation, which has reached a high level of 7.61 per cent, and pointed out that the recent rise in the bond yields is not likely to affect the government's borrowing programme.

"We hope to continue to keep the extent of inflation lower than before. Price stability is also a key concern for a central bank as we have been maintaining in all the annual policy statements," Deputy Governor of the apex bank, Rakesh Mohan, said. "The average inflation in 1997 was 7 per cent and between 1997 and till now, it averaged at 4 to 5 per cent. Today people get upset if it reaches a level of over 7 per cent. For almost 30 years, we had an average inflation of 7 per cent so this (people getting upset) is an encouraging sign," he added.

He also asked the banks to step up their respective Investment Fluctuation Reserves (IFR) and cautioned them about investing excessively in government securities (g-secs).

Analysts said this statement by the RBI official comes in the backdrop of uncertainties in the interest rate scenario.

Mr. Mohan, on the sidelines of a seminar, told reporters that the annual turnover of G-sec market was double the gross domestic product of the country and probably the second largest in Asia after Japan.

Asked about the impact of rise in yields on borrowing programme, he said "We have had no difficulty till date and there is ample liquidity in the financial system."

PTI

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