RBI to keep rates till full economic recovery: Subbarao
16 Sep 2009
Although inflationary pressures are building up, the Indian central bank will start exiting the monetary expansion programme only after a full economic recovery, Reserve Bank of India (RBI) governor Duvvuri Subbarao said yesterday.
However, the ''question of exit will fall upon us much sooner than other countries,'' Subbarao said, stressing that any exit plan will have to be coordinated with actions of other central banks.
Speaking at a seminar organised by the Indian Council for Research in International Economic Relations, Subbarao, however, said India may need to raise interest rates before other countries do so.
RBI has cut its benchmark interest rate six times from October 2008 through April.
''If India withdraws (from the expansionary fiscal and monetary policies) earlier than other countries and raises interest rates, then we will have capital flows coming in. This will be a problem with so much of liquidity going around,'' he pointed out.
''In taking a call, especially on monetary policy on exiting, we will not exit until we are sure that recovery is secure, and soon thereafter, we will start unwiding accommodation,'' Subbarao added.
