RBI MPC To Reassess Growth, Inflation Dynamics In October Amid Higher Crude Prices: Governor Malhotra

New Delhi, Sep 12 (KNN) The Reserve Bank of India's Monetary Policy Committee (MPC) will reassess growth and inflation dynamics at its October meeting amid rising crude oil prices due to the ongoing West Asia crisis, Governor Sanjay Malhotra said on Friday.

Speaking to CNBC-TV18, Malhotra noted that the impact of higher crude prices on inflation would depend on the extent to which the increase is passed through to consumers.

“Crude has gone up. July was for the Indian basket an average of USD 82 (per barrel). August it has gone up to USD 90 (per barrel) and so that will certainly have some impact, but it will depend again on the pass-through,” he said in the interview.

The government has absorbed and cushioned much of the shock, allowing the Indian economy to weather the impact, Malhotra said. The RBI will continue to monitor the persistence and generalisation of inflation as well as inflation expectations.

“Risks are there on both sides,” he noted, adding that the MPC would make a fresh assessment of growth-inflation dynamics when it meets “in a month or so”. The next MPC meeting is scheduled for October 5-7.

FCNR(B) Inflows Show Strong Investor Confidence

Malhotra highlighted that inflows under the recently concluded FCNR(B) deposit mobilisation facility were ‘very robust’, reflecting confidence in India's macroeconomic fundamentals.

The inflows totalled USD 127.22 billion, with nearly half of the deposits concentrated in the five-year tenor at around 48.5-50 per cent. About 42 per cent was in the three-year to four-year maturity bracket, while around 9 per cent fell in the four-to-five-year window.

The strong inflows have helped stabilise the foreign exchange market, improve liquidity and strengthen external-sector resilience, he said.

RBI Has Tools to Manage Surplus Liquidity

Malhotra emphasised that the RBI has sufficient tools to manage the current surplus liquidity in the banking system and is prepared to use them as required.

“Some of the liquidity will be withdrawn on its own over a period of time,” he said.

(KNN Bureau)