Inflation Seen Moderating (09-Mar-2010)
Mr. Duvvuri Subbarao, Governor of Reserve Bank of India (RBI) has said that the Inflation in India should moderate in the coming months and the RBI will ensure interest rate levels do not have a negative impact on the competitiveness of the economy.
Mr. Subbarao said the RBI has raised reserve requirements - both liquidity reserve requirements and cash reserve requirements and will evaluate the situation in next month.
Mr. Subbarao also said that the plans to reduce the country''s fiscal deficit in 2010 and 2011 would help to manage inflationary expectations and facilitate demand for private credit.
He said the government''s borrowing program is expected to proceed smoothly over the 2010-11. The cutback in fiscal deficit will certainly helps in monetary policy management.
The Government of India has said that it will count on surging economic growth to help reduce its fiscal shortfall and that it plans record levels of borrowing in 2011.
India has disclosed plans to increase the market borrowings by 1.3 % in its $239 bn budget, which has pushed bond prices lower as investors have anticipated a flood of fresh debt supply.
Mr. Subbarao said that he expected the government''s borrowing program to proceed smoothly over the coming financial year.
He said RBI will be able to manage the government borrowing program in 2011 as it has indeed this year. RBI believes that there will be enough liquidity to meet private credit demand. RBI has estimated that in the 3rd quarter policy that bank deposits will surged by 17 %.
He added that this year yields had raised slightly in 10-year government bonds, but would be managed over the coming 12 months.
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