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RBI for change in course for capital account management

HYDERABAD: The Reserve Bank of India (RBI) is not averse to some change in course while managing the excess capital inflows so that capital account and monetary management will continue to facilitate high growth, while maintaining price and financial stability.

Delivering the inaugural address at the 44th annual conference of Indian Econometrics Society here on Thursday, RBI Governor, Y. V. Reddy, said the apex bank considered it prudent to continue to analyse and monitor different scenarios and possible contingencies.

The emerging challenges to the management, both in the short and over the medium-term, had been recognised by the policymakers at all levels. Strategic management of capital account would warrant preparedness for all situations, and the challenges for managing the capital account in such unexpected turn of events would normally be quite different.

Though the underlying fundamentals of the Indian economy were strong, Dr. Reddy felt that “it will be prudent not to exclude the possibility of some change in course, due to any abrupt changes in sentiment or global liquidity conditions.”

Many central banks in the world wanted to “inject liquidity into the overnight and term money markets” due to pressure in the global money and credit markets.

“The impact and outcome of these recent actions of monetary authorities still appear unclear, for the immediate future on the financial markets and for the longer term on the real economy in terms of growth rate as well as price stability.

In the meantime, the equity markets in most economies are buoyant but are far more volatile over longer periods than in the recent past,” he observed.

Dr. Reddy released the India Development Report (IDR) 2008, brought out by Indira Gandhi Institute of Development Research. C. R. Rao, statistician and Eberly Professor in Pennsylvania State University, U.S., felt that the fruits of economic growth should reach the poor and needy.

The President of Indian Econometric Society, R. Radhakrishna, and Vice-Chancellor of the University of Hyderabad, Seyed E. Hasnain, also spoke. G. S. Bhalla, Professor Emeritus, Jawaharlal Nehru University, reviewed the IDR.

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