The Reserve Bank of India (RBI) has said that the Met department forecast for a sub-normal monsoon is not a serious concern.
According to the second revised forecast, the Met Department on Tuesday had said that monsoon rains are expected to be 95 per cent of the long-term average of 50 years — down from the April forecast of 98 per cent. Rainfall between 96-104 per cent is considered normal monsoon.
“The impact of it would be a function of what’s the regional spread of it. And one element of the forecast was that in the pulses and oilseed zone, there will be 94 per cent rains. Regional forecast tend to be that much more inaccurate. Going by the monsoon forecast, I do not think there is any immediate concern in terms of prices of these commodities which have been the stress point for the last couple of days,” said RBI Deputy Governor Subir Gokarn.
When asked about the impact of the Greece crisis, Gokarn said: “The resolution of the Greece situation will clearly reduce some of the uncertainties surrounding the Euro zone economy. But there are other risk factors also. The US is also showing some signs of moderation. So, it is not confined to Europe. It appears to be a broad-based weakening of the momentum what we saw in the first quarter.”
“We are looking at the impact it will have on various factors including the commodity prices. We have seen some softening of prices in the past few weeks. If that continues, it will change the overall inflation scenario somewhat.”
However, Gokarn was quick to add that it was too early to take a firm call on this. “It could also impact capital inflows, that’s something we just have to wait and watch — how different developments in different parts of the global economy impacts capital inflows.”
With rising interest rates, the deputy governor said the spread between the deposit growth and credit growth was declining. “Banks’ credit growth should be expected to slow down. We expect the deposit rates to go up which has been happening. So the wedge between deposit growth and credit growth which had peaked at around 9 per cent before our January policy is now a little less than five per cent,” Gokarn added.