RBI will manage risks as they evolve: Reddy

Reserve Bank of India Governor Y V Reddy today said the central bank was confident about containing inflation, but was worried about global oil prices.

"RBI will manage risks as they evolve," Reddy said at the press conference after the announcement of the Annual Policy Statement announced earlier in the day.

Pointing that only 15% of the world oil price hike has been passed to domestic consumers, he said: "oil pass-through was yet to take place in our economy."

RBI left key interest rates unchanged to boost investment and moderate prices while aiming at sustaining 7.5-8% GDP growth in the current fiscal.

Pegging inflation at 5-5.5% in 2006-07, the central bank raised the interest rates on non-resident rupee deposits and export credit in foreign currency to ensure adequate liquidity in the system through absorption of more foreign exchange.

Reddy said the projected 7.5-8% GDP growth in 2006-07 is "critically" dependent on agriculture, and has to grow at a faster rate. "There are three major risks that the growth momentum faces - physical infrastructure, fiscal situtations and agriculture growth," he said.