The improving growth outlook and commitment to price stability have prompted the Reserve Bank of India (RBI) to raise the policy rates to contain rising demand-side inflation pressures. Going forward, we expect growth to remain robust with gross domestic product likely to grow at around 8.5 per cent in 2010-11. Our projections show that WPI inflation has already peaked and is set to steadily decline. With the onset of the busy season, credit is likely to pick up further but much depends on the evolving liquidity situation. Also, the improving outlook for global growth could see commodity prices firm up. In this milieu, RBI has acted to anchor inflationary expectations without hurting growth.
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