The Hindu : National : Ready to use forex reserves to absorb oil shock: RBI chief

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Ready to use forex reserves to absorb oil shock: RBI chief

Special Correspondent

HYDERABAD: RBI Governor Y.V. Reddy said on Thursday that the bank would take recourse to full range of instruments to contain inflation and would include conventional and unconventional measures.

Talking to journalists after delivering the 40th convocation address at the Acharya N.G. Ranga Agricultural University on Thursday, he said they were ready to utilise India’s foreign exchange reserves to absorb shocks such as that from oil.

Referring to Wednesday’s fuel price hike, Dr. Reddy said the government package involving some ‘pass-throughs and burden-sharing’ was very positive. He said there were three extraordinary situations globally, relating to food, financial markets and fuel and the outlook for India in terms of food prices in the months to come seemed to be encouraging.

On global financial markets, there were indications that the turbulence was beginning to reverse and come back to normality, he said. By and large, in India, he did not expect any serious contagion as the financial fundamentals were very strong. He said the global situation was quite extraordinary and the RBI was carefully monitoring the developments, while focussing on careful management of liquidity conditions.

In regard to India, he said, the fundamental driver for growth conditions continued to be strong and that the GDP growth was anticipated to be between 8 and 8.5 per cent subject to a normal monsoon. He said the negative development of higher price of oil globally was anticipated.

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