Yes, we can! Let’s make Subbarao the IMF chief

In an interconnected world, the arc of history bends to connect seemingly unrelated events. And even when it doesn’t, we can on occasion bend it to our advantage. RBI Governor D Subbarao should spread his wings and heal the monetary world. We are at just such a moment following the sensational arrest of IMF’s Managing Director Dominique Strauss-Kahn for allegedly sexually assaulting a hotel maid in Manhattan. Equity and currency markets around the world are nervous as hell because Strauss-Kahn’s exit has plunged the ongoing talks to resolve the European debt crisis into disarray. Greece, that blessed country that operates in a parallel economic universe, is on the verge of a technical default on its debt, the consequences of which will have serious consequences on global markets. With Strauss-Kahn now cooling his heels in the slammer, Eurozone has lost a man who lent considerable heft to the talks to resolve the debt crisis. The IMF has named Deputy Managing Director John Lipsky to step up, but – here’s the problem – the man is already counting down the days to his retirement in August. In other words, just when the global economy needs a steady hand at the till at the IMF to calm its frayed nerves, the organisation finds itself headless — and mired in scandal. Fortunately for the world, the hour produces the man. And India can serve up just such a steady hand to head the IMF: our very own RBI Governor Duvvuri Subbarao. The circumstances for the ascension of an Indian to the top job at the IMF have never been more propitious. Just last month, British Prime Minister David Cameron, in an interview to BBC4, said it was about time the IMF looked to pick a leader from “another part of the world” (than the developed West).

“It may well be that actually when you think that the IMF has got to be listened to and taken seriously by countries not just in the West but all over the world, it may well be that it’s time to actually have a candidate from another part of the world in order to increase its standing in the world.“If you think about the general principle, you’ve got the rise of India and China and South Asia, a shift in the world’s focus, and it may well be the time for the IMF to start thinking about that shift in focus.”

Cameron was saying this principally to spite his predecessor, Gordon Brown, but why should that inhibit us? Why can’t we pay the Brits back in their ‘divide-and-rule’ coin and leverage their dissensions to our advantage? When it comes to a showdown between the Indian and the Chinese central banks over monetary policy management, the RBI knocks the People’s Bank of China out of the ballpark. The RBI is, in the assessment of internationally renowned economists, arguably the “world’s best central bank.” Indicatively, in an interview to Firstpost economist Dr Jim Walker compared the central banks in India and China.

“The RBI continues to be one of the best central banks around for monitoring the people under its supervision – which is the Indian banking system. It picks up on problems within specific banks very quickly and forces them to make specific provisions or change its risk asset weightages on property, on mortgages… In that sense, the RBI is still a model central bank. “This is the contrast between India and China. In India, we’re looking at 13-14% interest rates, which send a disciplinary signal to the private sector… The discipline of high interest means you get very high returns and the result of that usually is that a private non-financial corporate sector that can sustain their companies in downturns because they have such a high margin on their investments. You get exactly the reverse in China.”

As the man who heads the RBI today, Subbarao hasn’t hesitated to take harsh decisions when they were needed, as reflected in the RBI’s recent hike in interest rates, which beat market expectations. The IMF could do with just such a man at the top. By a confluence of circumstances, Subbarao’s services could soon become available: his term as RBI Governor ends in September 2011, barely months from now. Rather than retiring with a good book –or taking up a political appointment as a State Governor – Subbarao should spread his wings and heal the monetary world. He would make a heck of an IMF chief in other ways too. He is given to quoting Groucho Marx, mangling Chinese sayings, and quoting Latin while explaining his monetary policy approach. And to top it all, he’d never embarrass the IMF the way Strauss-Kahn did.

SBI may absorb savings account rate increase

Kolkata: Even if deposit cost goes up in case of deregulation in savings bank rate is implemented, country’s largest bank State Bank of India is unlikely to recover that from its borrowing customers, said A Krishna Kumar, managing director, SBI. It is also unlikely to increase the minimum balance for the savings accounts in the days of post-deregulation of savings bank rates, unlike some of the private sector and PSU banks which are keen to recover the higher costs of deposits from the borrowers. ICICI Bank has already said that it will add the cost to its lending rates in case it has to hike the deposit rates after the deregulation of the saving bank deposit rate is allowed by the Reserve Bank of India. Moreover, SBI will try to abstain from increasing transaction charges to offset the increase in cost. It will, on the other hand, stress more on other incomes to offset the impact. “The deregulation of the savings bank rate is still being discussed. After it is in place, we will look into the measures of how to offset the increased cost of borrowing,” said Krishna Kumar.  Talking to FE he said that SBI’s objective has been to encourage use of savings bank for the common man. “I do not really believe that we are going to take such drastic steps as we are encouraging use of savings bank for the common man. It does not make any sense to again put up a charge on the customers from that point of view,” he said. Commenting on the return on assets he said that the bank has to use funds more efficiently. In 2009-10, RoA of the bank had fallen to 0.88% from 1.04%. “May be in SBI we are not doing as best as we probably can. The way forward is increasing efficiency of our operation and put more emphasis on usage of alternative channels,” he said. Accepting that the bank’s margins will come under pressure while the rates go up, he said, “We are trying to prepare our rates in such a way that it does not affect our margins too badly.” The SBI, along with its associate banks, is looking at opening another 10,000 ATMs during the financial year. The banking behemoth, along with its associates, has around 25,000 ATMs across the country. It will also open 1,000 branches along with almost 500 in rural areas during this financial year.

Provident Fund interest rate to be hiked?

Bangalore: Union Minister for Labour and Employment M Mallikarjun Kharge today said the government was looking at further hiking the interest rate on Provident Fund from the present 9.5 per cent. "We are contemplating further increasing the interest rate on Provident Fund from the present 9.5 per cent. The interest rate on Employees Provident Fund (EPF) was increased to 9.5 per cent recently. "This time also we want to give more to the employees. We are working towards it", he said while inaugurating the Southern Zonal Office of Director General of Mines Safety here. Kharge also said the Ministry was bringing in 32 amendments to the Mines Safety Act formulated in 1952 wherein a number of stringent steps would be introduced for the safety of mine workers .  The steps include increasing the penalty for violating mines safety norms from Rs 1,000 to Rs 1 lakh. In cases where a penalty of Rs 5,000 was being imposed, it will be increased to Rs 5 lakh. "Similarly the punishment (for violating safety norms) will be increased from one year to five years imprisonment and in cases where the person was sentenced to three years, it will go up to seven", he said. Kharge said the main objective of bringing the amendments was to make "all those concerned with the mines-- from the owner to the agent to the director-- accountable for the safety of mine workers". The industry also had to be alert and take precautions to avert any disaster instead of acting only after the disaster takes place, he said. "The proposed amendments have already been introduced in the Rajya Sabha and are now before the Standing Committee", Kharge said. The minister appealed to Union Minister of state for Mines, Dhinsha J Patel, who was present on the occasion to instruct the officials in his department to direct mining lease holders to accord toppriority to the safety of mine workers. Kharge said Karnataka, which was under the control and jurisdiction of earlier Southern Zonal Office based at Hyderabad, would now come under the new zonal office.  "We are also thinking of opening a regional office and also a sub-regional office here provided we get the required sites for it. We will be writing to the Bangalore Development Authority and Karnataka Housing Board on this issue", he said. Earlier, Patel said the Central government provides the guidelines for mining and it was for the state government to enforce it stringently. He said granting of mining leases also comes under the purview of the state. "It is the state which earns royalty from it (mines)," he said. Apart from bringing in amendments to the Mines Safety Act, the ministry was also considering reviving the mines which have been closed, he said.

Brace yourself for double-digit inflation again

NEW DELHI: As if the sharp of petrol price by Rs 5/litre on Saturday was not enough, Monday brought the frightening prospect of double-digit inflation coming to your door soon, fuelled this time largely by a spike in manufactured goods.  There is already strong inflationary pressure in the economy and it is unlikely to come down soon as is evident from RBI's recent interest rate hike. On top of this, there is the impending increase in diesel prices, which is bound to send the prices of many goods and commodities upwards. A Rs 3 hike in diesel prices would add 25-30 basis points to inflation (100 basis points equals percentage point).  While inflation based on wholesale prices rose 8.66% in April, after being moderated from the upwardly revised 9.04% in March, wholesale prices data released by the government showed that the economy faces strong inflationary pressures. The government also revised the February inflation number to 9.54% from the previously reported 8.31%. "This suggests that latent inflationary pressures in the economy are strong. In view of such large revisions, the final March 2011 inflation figure (to be published next month) could well be close to 10% year-on-year," Barclays Capital said in a research note. The RBI had estimated inflation to be around 8% by end March but indications are that its projections would be missed by a wide margin. RBI has raised interest rate nine times since March 2010 to control price pressures and has said it is ready to sacrifice growth in the short term to tame inflation. Economists expect the RBI to raise rates again when it meets for its policy review.  Oil marketing firms on Saturday raised petrol prices by Rs 5 per litre which is expected to heap more pressure on household budgets. Milk producers have also raised prices and there is talk of an increase in diesel and cooking gas prices. All this will add to the pain of households.  "March itself can show double-digit inflation if the trend of upward revisions continue. Inflation is not going away any time soon. We expect the RBI to raise interest by 25 basis points in June and in August with upward bias and there could be another hike after that," said Samiran Chakraborty, economist at Standard Chartered Bank. Finance Minister Pranab Mukherjee said inflation in non-food articles is a continued source of concern. It remains elevated at over 27% in April 2011, he said, adding that he was not comfortable with the level of inflation despite "welcome signs" of moderation in April. The government also said the WPI new series had a programming error and the WPI for metal products was not getting incorporated in the index of basic metals, alloys and metal products and manufactured products. As a result of this correction, the rate of inflation for March, 2010 has increased from 8.98% announced earlier to 9.04% and the rate of inflation for April, 2011 without the correction would have been 8.53% as against 8.66%.

ET in the classroom: What is stagflation?

Stagflation is an economic situation where the growth rate slows down, unemployment levels remain steadily high & inflation also stays high.

What is stagflation?

Stagflation, a concept which did not gain acceptance till the 1960s, is described as a situation in the economy where the growth rate slows down, the level of unemployment remains steadily high and yet the inflation or price level remains high at the same time. At the first instance, high inflation and unemployment or slower growth seem like opposites and mutually exclusive.  It came to be seen in the 1970s as a situation when the economy has low productivity and yet the goods are highly priced in spite of low unemployment. The term 'stagflation' came to be used for the first time in the British Parliament by Lain Macleod in 1965. Once stagflation occurs it is difficult to deal with. The measure a government usually takes to revive an economy in recession (cutting interest rates or increasing government spending) also increases inflation.  Under normal recessionary conditions, inflationary policies are acceptable, but here, given the already high inflation, pushing inflation still higher could mean prices spiralling out of control, thus further hitting productivity and growth.

What causes stagflation?

The major reasons for stagflation, whenever it has occurred in history, have been-supply shocks or shortages due to unforeseen reasons which push up prices of essential commodities, causing an inflationary situation and at the same time pushing up production costs, as it happened in 1970s in the US. The other reason is failure of the monetary authority to control excessive growth of money supply in the economy and excessive regulation of goods and labour markets by the government. For example, in the 1970s, a similar situation occurred during the global stagflation, where it began with a huge rise in oil prices, but then continued as central banks used stimulative monetary policy to counteract the resulting recession, causing a runaway wage-price spiral.

Is India on the brink of stagflation?

Though the central bank and the Centre have had to revise their growth targets, which have taken a hit due to persistently high double-digit inflation, economists are far from assuming a stagflation like situation in India just as yet. The Reserve Bank of India deputy governor Subir Gokarn has said headline inflation numbers are much higher than the appropriate rate of inflation that will moderate growth but will keep it steady, which according to RBI's estimates, should be between 5% and 6%.

Prices unlikely to see steep drop in the near term, says Gokarn

Pointing to stickiness of high commodity prices, the Reserve Bank of India on Monday said prices would not come down sharply in the near term. “The pace of rise in food prices, which was 20 per cent few months ago, has softened to 10-15 per cent. Still, we can hardly gain comfort from it,” RBI Deputy Governor Subir Gokarn said, while addressing the India chapter of the International Chamber of Commerce. Though cereals (wheat and rice) have been stable in the last two years, prices of milk, pulses, oil seeds, eggs, fish, meat, and fruit and vegetables had gone up substantially. The global crude oil prices have plateaued. However, they were likely to remain at the present level or go up, Gokarn said. In recent months, crude prices had touched $120 a barrel, reflecting concerns on political upheavals in West Asia and North Africa. Commenting on the inflation data for April, the RBI deputy governor said the pattern of high inflation level was persistent. “It is not a pleasant thing to be proved right. But it (high wholesale price index inflation) is a reality,” he said. Inflation decelerated slightly to 8.66 per cent in April from 9.04 per cent in the previous month but remained above the RBI’s comfort zone. RBI, in its annual policy for 2011-12, had estimated wholesale price inflation at about six per cent by March 2012. Inflation is expected to stay at elevated level for two quarters. Gokarn said the risk of commodity price inflation becoming generalised was now visible. Even though India’s economic growth rate is reassuring, the slowdown in investment activity is not desirable. The rise in industrial production had been volatile, while investment had slowed down.

Nabard staff seeks full-time chairman

State-run National Bank for Agriculture and Rural Development (Nabard) has been without a chairman for the last five months, after the term of its former chairman, UC Sarangi, ended in December 2010. Currently, Rakesh Singh, additional secretary in the finance ministry, holds the additional charge of Nabard chairman. Nabard managing director KG Karmakar’s term was also over on May 4. Nabard officers and employee unions have now approached the prime minister and the finance minister for the early appointment of a new chairman. A full-time chairman is essential for the bank to coordinate with commercial and cooperative banks and help achieve the Centre’s target of agricultural credit of over Rs 4 lakh crore in the current financial year. An inspection report by Nabard had earlier come in handy for the Reserve bank of India to recommend the supersession of the Maharashtra State Cooperative Bank (MSCB). However, Nabard's acting chairman had issued orders prohibiting the release of any bank report or communication pertaining to MSCB. A senior Nabard official, speaking on the condition of anonymity, told Business Standard, “It has been five months now. The bank is functioning without a full-time chairman and even the managing director’s term ended last week. The Centre had already completed the necessary process to shortlist candidates for the new chairman. It is high time the Centre appointed a new chairman. This is also crucial, since the kharif season is going to start and decisions on refinance are crucial.” The bank has been assigned a crucial role to promote rural infrastructure development.

FinMin, regulators meet today on infra debt fund

The finance ministry will meet regulators tomorrow to decide the structure for the proposed Infrastructure Debt Fund to finance the core sector to sustain high economic growth. The government is expected to come out with guidelines on the Fund by June-end and broad indications say it may take the form of a company, as well as a Trust.   Economic Affairs Secretary R Gopalan is scheduled to meet all stakeholders, including the Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority (Irda) to work on the guidelines. The meeting will discuss the capital adequacy ratio for companies to be helped and the exposure limits. Issues involving regulators, potential debt seekers, pension funds and credit rating may also come up in the meeting, said a finance ministry official. The ministry had an internal meeting today to discuss the contours of the Fund. The view is that instead of owned funds, it should be pooled funds. Since both companies and trusts may be allowed in this space, they would issue bonds and units accordingly. Sebi will regulate companies and RBI will regulate trusts. “We will prepare the structure for both and leave it to the promoters to decide. So, both bonds and units could be issued,” the official said.  In the Budget for 2011-12, finance minister Pranab Mukherjee had announced setting up the funds through special purpose vehicles for attracting foreign investment in the infrastructure sector. “To attract foreign funds for financing of infrastructure, I propose to create special vehicles in the form of notified infrastructure debt funds,” he had said in his Budget speech in February. The plan is to invest $1 trillion in ports, highways, power utilities and telecom infrastructure in the next five years. A comprehensive policy framework for a public-private partnership in building of physical infrastructure and social sectors such as health and education is also on the anvil. It will lay down guidelines for the entry of private players and implementation of infrastructure projects. According to the official, financial assistance of Rs 8,661.45 crore was released in 2010-11 for recapitalisation of 53,380 primary agricultural societies (PACs), against Rs 7,972.22 crore for 49,764 PACs in 2009-2010.

SEBI, IRDA set to surrender fiscal autonomy

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Foreign investment in MFs likely to face cap

MUMBAI: India's policy-makers are considering putting a cap or ceiling of between $5 and $10 billion on investment by foreign investors in Indian mutual funds to possibly limit the impact of any surge in inflows once this route is opened up soon.  The government had announced in this year's budget that it would allow overseas individuals to invest in equity schemes of Indian mutual funds as part of a move to diversify the class of foreign investors in the local equities market. Securities market regulator, Sebi, the Reserve Bank of India and the finance ministry have been in talks to operationalise a scheme for this and the central bank has suggested that as a prudential measure, a ceiling on investment by these foreign investors should be fixed to start with, two senior officials ent said.  The way the scheme will operate is that a foreign investor will have to open a dematerialisation or paperless trading account and a bank account here for which the Know Your Customer norms will be done by a local bank or intermediary registered with regulators here. Once this is done, foreign investors can buy into over 400 equity schemes.  Foreign funds and non-resident Indians who are registered with Sebi are allowed to invest in equity mutual funds but there has hardly been any investment except in select exchange traded funds.  In the Indian equities market, there are no fetters on foreign funds in terms of investment except a limit of 10% on a single foreign investor buying into a company's capital. For investments in Indian corporate and government debt too, there are restrictions. "We need a framework for both capital inflows and outflows and we thought that it would not only be prudent but also provide clarity upfront if we say that there would be a ceiling on investment," a senior official said. This official declined to be identified.  What could be of concern to the central bank is a possible surge in volatile capital inflows later which could put pressure on currency and inflation management. When foreign capital flows are robust, the Reserve Bank will have to mop up these flows which in turn results in boosting liquidity in the local markets. To check this excess liquidity, the RBI sells securities or bonds to banks and institutions to drain it out - a process known as sterilisation. This however comes at a cost to the government - which has to service the interest cost on these bonds.  Right now, such worries are overblown because excess inflows if any are being used to finance India's current account deficit - the excess of goods and services imports over exports. In FY11, foreign portfolio investors bought stocks and bonds of over $31 billion. In the year to date, foreign funds have been net sellers at $490 million. Sebi has worked out a scheme for foreign investors to buy into local mutual funds which is being vetted by the government and the Reserve Bank of India. One of the challenges in getting the scheme going is in ensuring KYC or due diligence of the foreign investor. Only some of the depository participants such as banks which have a wide global network may be in a position to carry this out. Indian institutions may either to forge tie-ups with foreign partners or open offices abroad if they want to woo greater foreign portfolio investment. If the scheme takes off as policy makers are hoping it would - it will boost India's mutual fund industry which manages assets of over Rs 7,00,000 crore and is now weighed down by the problem of lack of interest on the part of distributors to sell mutual funds. They have been loath to push mutual fund products after the regulator banned fund houses from charging investors an entry fees or load.

Upgraded RBI sub-office starts functioning in Srinagar

Srinagar, May 16: The upgraded sub-office of Reserve Bank of India started its functioning here for summer session from today. Besides, the Cell of Foreign Exchange Department already functional in Srinagar, the Cells of Rural Planning and Credit Department (RPCD) and Department of Banking Supervision (DBS) carved out of the Jammu Regional Office, have started functioning from existing premises at Rajbagh, here. The Cell of DBS will have supervisory control over commercial banks functioning in the Kashmir and Ladakh Divisions. It will also carry out financial inspection of the banks. The Cell will also closely monitor the quality of customer services rendered by the commercial banks, the bank in a statement said today. The RPCD Cell will attend to the issues pertaining to the rural/ urban development besides having regulatory control over the functioning of Regional Rural Banks and State/ Central Co-operative Banks operating in the Valley. The Cell will also monitor the performance of banks under Annual Credit Plan and implementation of poverty alleviation and employment generating Government Sponsored Schemes.

See effect of recent RBI policy in 2-3 months: Montek Singh

The wholesale price index (WPI) for the year rose to 8.66% in April as against 9.04% in March mostly on higher fuel and food prices, government data showed on Monday.  Planning Commission Deputy Chairman Montek Singh Ahluwalia admitted that current inflation is out of the comfort zone. He, however, said that the effect of recent monetary policy steps will be seen in two-three months. Montek also agreed that it may not be wise to push high growth in an era of high inflation.  He further said, one should not expect too much softening in oil prices. “Oil prices will remain sticky with greater danger on upside,” he added. He also said that India may acheive 8.2% growth in 11th Plan Period and must aim to grow 9.0-9.5% in 12th plan period.

See effect of recent RBI policy in 2-3 months: Montek Singh

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Prices may not go up much from current levels: Gokarn

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High fuel prices to put pressure on RBI monetary strategy

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Subbarao spars with Montek on policy approach

The audience for Montek Singh Ahluwalia's lec ture at Mumbai's Indira Gandhi Institute of Develop ment Research (IGIDR) was in for a rare intellectual treat with Reserve Bank of India Governor D. Subbarao exchanging words with the Planning Commission's Deputy Chairman on the Plan panel's ambitious tar- gets and the means to finance these.  In his speech, Ahluwalia highlighted the need for a $1 trillion investment in infra- structure creation for India to continue to grow at 9% over the next five years. Ahluwalia's speech on the challenges in the 12th Five-Year Plan was the second foundation day lecture at IGIDR. Subbarao, the chairman of the board of IGIDR, responded to Ahluwalia's comments, and said, in his concluding re- marks, that government and bank financing could generate only half the $1 trillion re- quired over the course of the 12th plan that starts in 2013. India's central planning pro- cess is done in five-year phases. In the current budget, less than $150 billion has been al- located to capital investments and it will not be easy for the government to scale up finance needs of infrastructure, the country's top central banker said.  “Our regulation governing infrastructure finance is among the most accommodative in emerging markets,“ said Subbarao. Bank lending to infrastructure is already stretched and more loans to the same sector might affect financial stability, he added.  Subbarao also differed with Ahluwalia when it came to the government's ability to cut spending. In his speech, Ahluwalia indicated that a 9% target was achievable and outlined the government's efforts at raising plan expenditure over the 12th Plan period while consolidat- ing its finances by cutting down on non-Plan expenditure.  Subbarao questioned the government's ability to do so and said it might not be feasi- ble to cut down non-Plan expenditure. He pointed out that a significant part of non-plan expendi- ture is used to pay salaries to teachers, doctors and for maintenance of irrigation projects - all of which are needed for development. In the annual credit and monetary policy review re- leased on 3 May, RBI projected a less optimistic growth target of 8% for fiscal 2012, compared with the finance ministry's tar- get of 9%. Finance minister Pranab Mukherjee recently ad- mitted that a 9% target could be difficult to achieve. The governor didn't spare the finance ministry either and took issue with the latter's arguments, presented in the Economic Survey, that a high in flation rate may be the new normal and an acceptable outcome of high growth; he re- affirmed his commitment to an inflation rate below 5% over the medium term. This year's Economic Survey had pointed out that in evaluating the trade-off between lower inflation and lower growth, policymakers often fail to take into account the impact that inflation control measures could have on unemployment. Such an argument does not hold true in most parts of the world and certainly not in India when inflation is as high as it is, said Subbarao, citing research by the central bank's economists.

LOW INFLATION ESSENTIAL FOR STEADY, HIGH GROWTH

The Reserve Bank of India (RBI) today said growth in the short term may have to be sacrificed to tame rising prices. According to the central bank, steady growth requires lower inflation. “You cannot get high growth by tolerating high inflation in the long run,” RBI Governor D Subbarao said, while speaking at an event held at the Indira Gandhi Institute for Development Research. He said RBI had to manage demand and inflation expectations, which may lead to sacrificing some growth in the short term. Inflation, which remained above the central bank’s projections during 2010-11, stood at 8.66 per cent in April. The steep increase in fuel prices over the weekend is expected to add to inflationary pressures, according to economists. Subbarao said April inflation of 8.66 per cent was high and RBI needed to manage the trade-off between growth and inflation to hasten growth. “The objective of the 12th Plan is faster, more inclusive and sustainable growth. From RBI’s perspective, the primary challenge is to manage faster growth with low inflation. We need low inflation for steady and high growth,” Subbarao said. RBI has pegged gross domestic product growth at 8 per cent for the current financial year — lower than the government’s projection of nine per cent. “Perhaps the threshold for inflation is five per cent,” Subbarao said.  Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, while speaking at the same event, said any reduction in inflation would happen gradually. “I think inflation remains an area of concern. Inflation results which we are seeing now, are probably the outcome of measures we had taken three-four months back. I think the effect of what has been recently done would be felt two-three months down the road. Overall, I expect inflation to soften in the next few months. It will, however, remain above 6 per cent for some more time,” Ahluwalia said. He added the Planning Commission’s comfort zone on inflation was somewhere between five-six per cent. “It is agreed inflation would remain above 6 per cent for some more time. However, there is no dispute in anybody’s mind that inflation above six per cent is in the danger zone,” Ahluwalia said.  Apart from demand-side pressures, RBI saw rising oil and food prices as key drivers of inflation.  Subbarao said RBI had to manage the trade-off between growth and inflation to hasten growth.