Tighter money in the offing, says RBI chief
11 Sep 2009
India would exit the expansionary monetary regime sooner than other countries as inflationary pressures were showing up, according to Reserve Bank of India governor D Subbarao.
"The current state of expansionary monetary and fiscal policy is not the steady state. We need to exit out of it. We need to unwind," Subbarao said at a banking conference in Mumbai yesterday.
The central bank needs to take a balanced approach towards monetary tightening although it does not have a clear timeframe for shifting policy yet, Subbarao said. ''We need to exit at the appropriate time, in the right sequence. We have no clear idea. We are watching it,'' he said.
The reversal of India's monetary policy stance would be coordinated with other central banks globally. ''Co-ordination does not mean synchronisation; co-ordination does not mean everybody exits at the same time. Co-ordination means everybody understands what others are doing,'' Subbarao said.
''We need to take measured and timely action, and make a balanced judgement - not to be too benign, but also not go overboard with excessive or premature tightening,'' he said.
He pointed out that tensions between fiscal and monetary policies could impact the country's financial stability as the rising fiscal deficit would make it tougher for the central bank to maintain price stability.
