Reserve Bank of India on Wednesday attributed the surge in price level to rise in global prices of commodities and uncertainty in oil prices and feared that benign inflation would be difficult to maintain.
"The fear of deflation in advanced economies has been replaced by a possible upward pressure, led by increase in commodity prices. No doubt, these international developments enhance the probability of international transmission of inflation," RBI Governor Y V Reddy said in his address to the annual general meeting of the Federation of Indian Chambers of Commerce and Industry in New Delhi.
However, he said there were favourable factors to counter these recent adverse global developments to keep inflation at 4-4.5 per cent though the magnitude of which during the last two months had been above the original expectations.
"It is possible that the downward bias may not be attainable, but it appears that the range of 4-4.5 per cent for inflation indicated in the mid-term review continues to be relevant for policy purposes unless there are unanticipated severe shocks," Reddy said.
The spurts in inflation since the last two months mainly due to increase in the prices of fruits, vegetables, mineral oils, fuels and cotton textiles, Reddy said, "the inflation trends in the last two months have not been unexpected but magnitude of price rise has been above the original expectations."
Reddy said RBI would continue to "closely monitor" the price behaviour leaving no room for complacency on the inflationary trend."
