"...Of course there is an element of base effect and some local and global uncertainties always remain around us. So, we are watchful of all these developments and we will continue to taking all these inputs (while taking a view on interest rate)," he said at the RBI stall at India International Trade Fair (IITF) set-up to spread awareness on financial literacy and educate the common man on banking and financial matters.
"The food prices also reflected the softening trend and the third component is the monetary policy which was in our domain which was pursued so what we are witnessing today, it is a combined effect of all the things."
Inflation based on the Wholesale Price Index cooled to a 5-year low of 1.77 per cent in October driven by softening prices of fuel and food items. At the same time, retail inflation, based on Consumer Price Index, also eased to 5.52 per cent at end of October.
Also Read
He said however that inflation is an "area of careful observation".
RBI has adopted a guided path, he said, adding that "by January 2015 an inflation rate of 8 per cent is what we will be comfortable with. By January 2016, it is the inflation rate of 6 per cent which we are talking about. So, I think we could not have more clearer direction".
On deficit, he said the government has laid a roadmap for fiscal discipline and consolidation.
"Last year also a similar kind of goal was set and it was met, and I think the Finance Minister has mentioned it in more than one forum that the fiscal deficit target which has been set out will be met certainly," he added.
On the issue of proposed Chief Operating Officer for the central bank, he said RBI has not taken a final view on that as yet.