The Hindu Business Line : Jalan rules out repo rate cut

(From left) Mr Ravi Ratnayake (UNESCAP), Mr A.S. Jayawardena (Sri Lanka), Mr Ishrat Husain (Pakistan), Mr Tilak Rawal (Nepal), Dr Bimal Jalan (India), Mr U. Kyaw Kyaw Maung (Myanmar), Mr Mohammad Jafar Mojarrad (Iran), Mr Sonam Wangchuk (Bhutan), Mr Fakhruddin Ahmed (Bangladesh), and Mr Mohammad Firouzdor (ACU), posing for photo session at the 32nd Annual Board Meeting of the Asian Clearing Union in Bangalore on Monday.

BANGALORE, June 16

THE Reserve Bank of India has ruled out any change in the repurchase rate in the immediate future, but said the inflation outlook is positive.

Speaking to reporters here on Monday before attending the 32nd annual meeting of the Asian Clearing Union, the RBI Governor, Dr Bimal Jalan, said "Inflation outlook is positive and the second quarter will be even better." He said the positive outlook was partially on account of the weakening oil prices worldwide. Current inflation rate is 5.44 per cent.

Despite weakening inflation rate, Dr Jalan said there was no proposal for any immediate repo reduction as speculated in the financial markets. The repo rate, the rate at which short-term liquidity support is provided to the market, through repurchase of securities is currently at 5 per cent.

On large exchange reserves, he said this build-up was likely to continue. India currently has foreign exchange reserves of $81.672 billion. He, however, cautioned that this would not mean any big relaxations on the capital account. Instead, phased liberalisation would continue, he added. But, the large reserves gave tremendous confidence to the Government, he said.

Dr Jalan said despite the international uncertainties and the drought in the country, the economic growth rate of six per cent would be sustained, making the country among the fastest growing regions.

Referring to the ACU meeting, he said any proposal for a regional monetary union would have to be initiated by the Government. The meeting, he said, had focussed on making technology upgrading and moving over to a real-time gross settlement among the member-countries. This is to be kept as a medium- term objective of the ACU members.

At the meeting member-countries had focussed on the setting up of a regional clearing house to expedite settlements.

However, issues relating to alternative currencies for settlements have been referred to technical committee. Currently, settlements are being done in US dollars, though there is a 2-month settlement time. All payment settlements are done through corresponding accounts between the ACU member-banks.

In addition, the members also decided to enlarge the group to include countries such as China, Malaysia, Thailand, Maldives and Central Asian Republics. Thailand sent a team of observers for the meeting as a prelude taking membership in the ACU.

Dr Jalan speaking at the meeting called for greater trade cooperation among the member countries. Currently, trade between the eight countries is equivalent to about $7 billion annum. India's share in the transaction volumes in the ACU amounted to about 40 per cent, followed by the Republic of Iran.

It was also decided to hold the next meeting at Teheran in 2004.

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