The Hindu : Business : India resilient to financial shocks, says RBI Governor

Online edition of India's National Newspaper
Wednesday, Jun 08, 2005

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India resilient to financial shocks, says RBI Governor

Special Correspondent

MUMBAI: The Reserve Bank of India Governor, Y. V. Reddy, on Tuesday said the Indian economy had largely been insulated from episodes of global financial instability and, over the years, India had built resilience to shocks and was less vulnerable to output volatility.

"Barring supply shocks, in particular those due to the international oil prices, inflation, especially the core inflation, has been fairly low,'' said Dr. Reddy while addressing the eighth meeting of the Bank for International Settlements (BIS) Working Party on Monetary Policy in Asia.

Dr. Reddy said over the period, policy making was becoming more globalised as cyclical changes were becoming more synchronised especially since the 1990s.

"There is increasing convergence in perception, institutional structure, choice of instruments and communication strategy in monetary policy making.'' He added that the central banks over time had to rely on the confidence channel and often judgments were involved in managing perceptions.

Focussing on the country-specific features of India, he said the multiple indicator approach followed by the RBI was a logical outcome of the multiple objectives that characterise the monetary policy framework. The enactment of the Fiscal Responsibility and Budget Management Act provided further flexibility in the conduct of monetary policy, Dr. Reddy added.

Senior executives from central banks of Australia, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Philippines, Saudi Arabia, Singapore and Thailand attended the meeting.

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