Deficient rain matter of concern, RBI to act when needed

Poor monsoon is a matter of concern and could affect food prices, but the time is not ripe for the Reserve Bank of India (RBI) to act, its Governor D Subbarao said today.

"Yes, the agricultural situation is disturbing and there will be pressure on food prices. We are sensitive and mindful of the drought's impact on inflation and will take appropriate steps," he told reporters on the sidelines of a RBI function here today.

Subbarao, however, refused to discuss in public any mid-course policy correction that the central bank may consider.

Monsoon is this year expected to bring 19 per cent less rainfall than usual, resulting in an equivalent decline in sowing activities.

 

The Centre has already asked states to act against hoarders to check rising prices.

Meanwhile, Prime Minister's Economic Advisory Council Chairman C Rangarajan pointed out that price rise might not be a problem at the moment, but he foresaw an escalation in prices towards the end of this year.

As per the wholesale price index the price rise was currently negative, but the RBI should think in terms of taking appropriate measures when prices rise, he added.

He said there would certainly be an impact on economic growth because of the prevailing drought. But Subbarao said the economic growth projection of 6.5 per cent stands good even now.