RBI sees no change in inflation outlook

Despite inflation hovering over the 6 per cent mark, the Reserve Bank of India on Friday said it would not change the inflation outlook of around 5 per cent for the fiscal 2004-05 and expressed confidence on conducting the Centre's borrowing programme without difficulty.

"We are keeping a tight watch on inflation. If you look at the inflation details, some of it came because of the global price rise in oil, iron and steel and coal. But there is an evidence of commodity prices moderating", Reserve Bank of India Deputy Governor Rakesh Mohan told newspersons on the sidelines of a conference organised by Indian Banks' Association (IBA) and MAIT here.

China was also trying to "cool down" its economy "so there is an optimism on inflation", he said, adding, the oil situation still had some uncertainties.

Mohan said the consumer price index was still around 3 per cent and there has been no tendency for it to go up. On borrowings, the Reserve Bank deputy governor said "given the volume in liquidity, we are confident of carrying out the government's borrowing programme without any difficulty".

Referring to the impact of monsoon, he said "we still have to wait and see to assess it. Clearly in this region (western) last week, there is a resurgence of monsoon".

Meanwhile, the government on Friday said average inflation during 2004-05 would not exceed the target of 5-5.5 per cent. "RBI has pegged the inflation at 5-5.5 per cent for 2004-05 and it has not changed its forecast. There is no reason to believe that inflation will increase beyond that," Finance Secretary D C Gupta told PTI when asked about the increase in price level in the last few weeks.

He said the point-to-point inflation started rising from 5.8 to 6.52 till July 10, mainly due to "externally and internally induced and seasonal factors" but has remained static in week ended July 17.

Gupta listed hike in fuel prices in international markets, deficient rainfall and its possible impact on agriculture prices as some of the reasons for rise in prices.

Another reason why inflation was showing a sudden spurt during the middle of June and early July was lower base during the same period last fiscal, he explained.

"We still believe that it will average between that region (5-5.5 per cent)," he added.