According to Reserve Bank of India food prices rose 17.47 pert cent in the 12 months to Nov. 21, after the weakest monsoon since 1972 follow by floods in parts of the country hurt farm output. While food inflation is politically sensitive, it is viewed as largely beyond the scope of interest rate policy.
India reported economic growth of 7.9 pert cent in the quarter through September, its fastest rate in 18 months, beating expectations and adding pressure on the central bank to bring forward a rate rise to moderate mounting inflation.
Subir Gokarn, deputy governor of the RBI, said the exit from easy monetary policy is a "graded" process and economic growth alone will not determine its pace.
RBI has slashed its policy rates several times after October 2008 to help the economy deal with the global financial meltdown. However, in its October 2009 review of the monetary policy, it raised the statutory liquidity ratio (SLR) by 1 percentage point to 25 per cent, which hinted at unwinding of its easy money policy stance. SLR is the proportion of current and time deposits that a bank has to keep with RBI.