The Hindu Business Line : `Rise in repo, reverse repo rates may restrict inflation'

(From left): Mr Liqun Jin, Vice-President, Asian Development Bank; Mr Tarun Das, Chief Mentor, CII; and Mr Piyush Mankad, former Finance Secretary, at the ADB-CII `Mekong Development Forum: Promoting India-Mekong Cooperation' in the Capital on Thursday. — Ramesh Sharma

New Delhi , Nov. 10

DESPITE the volatility in the oil prices, the Reserve Bank of India on Thursday maintained that the increase in repo and reverse repo rates would restrict inflation to 5-5.5 per cent.

Speaking to newspersons on the sidelines of the Mekong Development Forum, organised by CII and Asian Development Bank (ADB), Dr Rakesh Mohan, Deputy Governor, RBI, said that the depreciation of the rupee against the US dollar was `orderly.' "What we are observing is an orderly condition and a two way movement in rupee due to the demand and supply in the forex market,'' he said. As of now, the central bank has no plan to intervene. Though the Indian currency has depreciated against the US dollar, it has appreciated against euro, pound sterling and other major currencies.

But the rising oil price is a concern as this could put some pressure on inflation. "Our analysis was that, if there hasn't been a monetary measure, then it may not be possible to restrict inflation between 5 per cent and 5.5 per cent, and, hence, the hike in the repo and reverse repo rates," said Dr Mohan.

On whether the high oil prices would impact other commodity prices, he said that currently there was no sign of the pass-through effect both in the domestic and international market.

He also said that with no change in inflation expectation, there was no pressure on lending and deposit rates of banks. However, "Interest rates are deregulated and is market determined. Let's see what happens," he added.

While addressing the conference, Dr Mohan said, India could benefit greatly from the business opportunities provided by the Mekong region. Although the trade volume among the countries in the Mekong region was to the tune of $200 billion, India's share in this was only 1.3 per cent, he said.

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