Reserve Bank study decline in FDI

Friday, February 11, 2011

BHOPAL - Reserve Bank of India (RBI) Governor D. Subbarao has said that RBI will study the factors responsible for the decline in the foreign direct investment (FDI) in the country.

Addressing a press conference here, Subbarao said: “The RBI would conduct an internal study on practices responsible for the decline in the FDI flows into the country.

“There was a comment made in the third quarter policy document about the decline in foreign investment coming into the country and we thought that at the Reserve Bank we must see the factors responsible for this,” added Subbarao.

Subbarao also said that during the meeting with RBI officials, Madhya Pradesh government expressed concern over lower Credit Deposit Ratio (CDR) of the State. He said that banks have agreed that in year 2011-12 they will take the CD ratio to 65 percent from 59 percent across the State.

“A credible fiscal consolidation plan and fiscal consolidation is important for a number of reasons on its own but the perspective of the Reserve Bank is also important because monetary policy is most effective when there is fiscal consolidation,” added Subbarao.

Subbarao said maintaining a balance between financial growth and controlling inflation was a tough task, but the apex bank was competent enough to handle this scenario.

“On the balance between supporting growth and managing inflation again we tried to as this is a difficult balance. It’s a perennial tension that the central banks around the world all the time have to manage particularly so in India particularly at this time because we are coming out of a low patch because of the global financial crisis but we are also caught up with inflation. So we want to set interest rates in such a way that the inflation is contained but it does not hurt growth,” added Subbarao.

Subbarao said inflation shot up due to a number of factors and pressures, including the present situation in West Asia and rise in food, commodity and oil prices. (ANI)

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