The Hindu Business Line : Policy steps helped rein in inflation: RBI

Mumbai, Sept. 14 Greater attention to price stability and pre-emptive measures taken in the economic policy has helped contain inflation rates and inflation expectation.

Maintenance of price stability and financial stability is essential for healthy corporate sector performance, said Dr Rakesh Mohan, Deputy Governor, Reserve Bank of India.

Speaking at a banking seminar in Mumbai, Dr Mohan said that productivity is at the root of long term inflation control. Technology can help in increasing productivity and per capita income, which can help in controlling inflation in the long term.

Maintaining price stability in money market rates was important for financial markets, he said. Monetary policy signal is given through repo (injection) and reverse repo (absorption) rates. Thanks to the economic reforms implemented in the 1990’s, there has been significant reduction of inflation from 7 per cent to 5 per cent.

“When inflation went beyond 6 per cent last year and early this year, there was huge amount of discomfort. We would like to bring it down to 4.5 per cent from the current levels in the medium term,” he said.

About the exchange rate movement, Dr Mohan said that the focus of economic reform was management of volatility, and not management of the level of the exchange rate.

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