RBI must focus on controlling inflation: PMEAC

With inflation still ruling above the 9 per cent mark, Prime Minister's Economic Advisory Committee (PMEAC) on Wednesday suggested that the Reserve Bank should continue to focus on controlling the rising prices.

Economic growth is important but the Reserve Bank of India has responsibility to see that inflation comes down, Prime Minister's Economic Advisory Council chairman C Rangarajan said on the sidelines of Delhi Economics Conclave.

"According to latest (inflation) numbers, it is still above 9 per cent. Therefore, concerns regarding inflation cannot be taken away from the monetary authorities," he said.

RBI, which has raised interest rates 13 times since March 2010, to rein in inflation, is scheduled to review the Monetary Policy on Friday.

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In the last review, it had indicated that it may take a pause the hike in December if inflation situation improves.

Industry has maintained that RBI's tight Monetary Policy regime is hurting investments and industrial production.

The inflation data released on Wednesday showed that the rate of price hike has declined marginally to 9.11 per cent in November from 9.73 per cent in the previous month.

Both the government and RBI have pegged the year end inflation at around 7 per cent.

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Asked if the central bank should intervene to arrest the slide of rupee against the US dollar, Rangarajan said, "The stated policy of RBI is to prevent volatility in foreign exchange market. I think RBI will act but it is really a call of RBI and it will depend on what is happening on market."

He said behaviour of the rupee, which touched an all time low of 53.75 vis-a-vis the US dollar, is a reflection of Current Account Deficit and extent of capital flows.

"If there is a temporary mismatch, this will lead to pressure on capital flows, but if capital flows pick up, then what we are now seeing, can also get reversed," he added.