New Delhi, March 17: The Reserve Bank of India (RBI) should consider carefully returning to normal monetary policy, with growth firmly on track and inflation rising beyond its comfort zone, deputy chairman of the Planning Commission, Montek Singh Ahluwalia, said on Wednesday.
The RBI is widely expected to raise its key lending rate by 25 to 50 basis points in April when it meets to review monetary policy as it continues steps to roll-back stimulus measures.
“Clearly inflation is become closer, much more into the worrying area. Secondly, we’re much more confident the growth is picking up,” Ahluwalia told reporters.
The annual wholesale price inflation accelerated to 9.89 percent in February and the finance minister said it could top 10 percent in March.
“What is the balance between controlling inflation and protecting growth, is an issue which the people responsible for short-term monetary policy have to take a look at,” Ahluwalia said.
The economy is seen expanding at over 7.2 percent in the year to March 2010, with growth expanding to 8.5 percent the year after and to 9 percent in 2011/12.
When asked if the strong growth and high inflation made a case for the central bank to return to a normal monetary policy, Ahluwalia said: “That is an issue I want the RBI to consider very carefully and I’ve no doubt they will make the right decision.”
Ahluwalia declined to say what he thought the RBI would decide during its April review meeting.
He said inflation was a concern and needed to be brought down, but dismissed concerns of a prolonged period of double-digit inflation.
“Over the next two months, I expect to see inflation coming down.”
——Agencies