High crude price pose risk to inflation: RBI

Rakesh Mohan, deputy governor of Reserve Bank of India (RBI), today projected a moderate inflation of 5% this fiscal, but said soaring global crude oil prices posed a risk to inflation.

"Inflation would be moderate this fiscal, and we believe it will be 5%," Mohan said on the sidelines of Stanford ATI Global Entrepreneurship Conference today.

He said rising global oil prices posed a risk to inflation, but the non-fuel commodity prices were stabilising.

Inflation during the week ended August 13 fell to a new low of 3.13% mainly due to cheaper iron ore, manufactured and essential non-food
items.

Mohan said the reduction in inflation from 7-8% to 4-5% in a year's time was a major achievement of macro economic policy.

He said excess liquidity in the system was a matter of concern as it could push inflation upward, but added that RBI had enough instruments to control liquidity variations in the economy.

"Liquidity has gone up and down over the past 18 months, and instruments with RBI were quite adequate to deal with the changes," he said.