Bangalore, Dec 29 (IANS) The Reserve Bank of India (RBI) is closely monitoring the spiralling inflation but would keep in mind the need to encourage growth before making changes to monetary policy, a senior functionary of the central bank has said.
“RBI has already started the first phase of exit in its October policy, though primarily in terms of signalling the stance rather than affecting the liquidity conditions or the interest rate,” said deputy governor Shyamala Gopinath in Bangalore.

“The evolving growth-inflation conditions will dictate the future course of actions from RBI,” Gopinath said Monday in an address to the Bangalore Chamber of Industry and Commerce.

According to her, rising food prices — a result of lower supplies — was responsible for stoking the inflation rate and the main challenge was to deal with the dip in food output.

Given this scenario, higher inflation could not be ruled out, she said.

“Since supply shocks take time to taper off, there is a risk that high inflation in essential commodities could affect inflation expectations over time and give rise to generalised inflation.”

India’s annual food inflation based on wholesale prices fell marginally to 18.65 percent for the week ended Dec 12 from 19.95 percent the week before even as prices of essential commodities continued to rule high.