MUMBAI, July 26 (Reuters) – The following are highlights of
comments made by the Indian central bank governor Duvvuri
Subbarao and deputy governor Subir Gokarn to reporters after the
Reserve Bank of Indias monetary policy statement.
Earlier on Tuesday, the central bank stunned investors by
raising interest rates by 50 basis points, showing unexpected
resolve in fighting persistently high inflation despite slowing
growth in Asias third-largest economy and uncertainty about
global demand.
RBI GOVERNOR DUVVURI SUBBARAO:
ON POSSIBLE US DEBT DEFAULT:
As far as a possible US debt default and the current
impasse of debt ceiling, we have reviewed the position and
believe we have sufficient liquidity to manage the situation; so
that we are prepared for possible repercussion in the market.
But whether they would actually default, what implication
it might have, is uncertain at this point of time.
On whether we are in touch with the U.S government? Not
from the Reserve Banks side. We had consultation, which is a
scheduled bilateral consultation with the US, end of June, but
nothing to do with debt impasse.
ON INFLATION:
Until we see a sustained downward trend in inflation, we
have to persist with our anti-inflation stance. Its difficult
at this point and even not possible for me to define exactly
what the calibration going forward will be.
But as long as inflation persists, there will be no
significant change in our stance.
ON POSSIBLE SHIFT OF MONETARY STANCE TO FOCUS ON GROWTH:
If consistently growth falls below 8 percent, then we would
...perhaps the balance would shift... as soon as the first
number comes below 8 percent the balance will not shift. It has
to be significantly consistently below that.
ON REPO RATE PEAKING
It is not as if in 2008 we were at 9 percent (repo rate)
and we need to go back there and a number of other factors are
different today than in 2008...So, I think to compare todays
monetary policy with what happened in 2008 would be misleading.
ON FISCAL DEFICIT
If the fiscal deficit is higher than it is projected today,
it will add to demand (government borrowing) and, therefore, add
to inflation pressure. That is one component of this output
equation that is fairly interest rate insensitive. So we hope
borrowing and fiscal deficit will be contained in budgetary
limits.
ON STANCE AHEAD
Until we see a sustained downward trend in inflation we
will have to persist with our anti-inflationary stance. It is
difficult at this time, and indeed not possible for me to define
exactly what the calibration will be going forward. But as long
as inflation persists, there will be no significant change in
our stance.
RBI DEPUTY GOVERNOR SUBIR GOKARN:
ON LIQUIDITY INFUSING STEPS:
Given our anti-inflationary stance we want to see liquidity
in deficit, that has been our objective for liquidity
management. At the same time we dont want it to become
disruptively deficit which is what motivated us to do some OMO
(Open Market Operation), tactical liquidity management in late
2010.
At this point, we dont see that scenario emerging. There
might be some temporary stresses in September with tax outgoings
and festival pressures but those are predictable and not shocks.
We would be looking to manage it in minus 1 percent mark on a
sustained basis.
(Reporting by Neha DSilva and Shamik Paul, compiled by Aditya
Phatak and; and Suvashree Dey Choudhury; editing by Malini Menon
and Aradhana Aravindan)
Tags: Monetary
0