Inflation has resurfaced, says Rajan

Says RBI monetary policy actions will be guided by a set of data points

Reserve Bank of India (RBI) Governor Raghuram Rajan on Wednesday said inflation had resurfaced and the central bank's monetary policy actions would be “guided by a set of data points”.

“We are one of the large countries in the world with the highest CPI (Consumer Price Index-based inflation), even as the growth is not as high as we would want it to be,” said Rajan. The governor was addressing a seminar organised by the Confederation of Indian Industry (CII) here.

“If you read the papers in the last few days, one of the primary concerns of the public is inflation. Inflation has resurfaced,” he added.

Rajan said inflation was not only seen in food items but in non-food segments like services. He revealed that the central bank would consider a set of data before deciding on its next monetary policy action.

“Next few days we are going to see some data... No single data point or number will determine our next move... But, we intend to try and bring inflation under control,” Rajan said.

He, however, was optimistic that the domestic economy was showing signs of improvements.

“I think growth is certainly in the process of bottoming out, but to be confident that it is picking up and there will be a strong recovery we have to await more data... Exports are picking up from growth in partner countries. The rupee has recovered some ground and is more stable than before. We are not the most volatile currency in Asia anymore,” Rajan said.

He said as the foreign exchange market would stabilise, the central bank will withdraw restrictions it imposed earlier. “Probably the most important reason for us not to be complacent is that we have an election coming up. We cannot take it for granted that we will have a stable government. We can only hope but cannot take it for granted,” Rajan said.

RBI would release a discussion paper on early detection of stress in companies and financial institutions by next week, he added.