Inflation "very high", RBI hints at more monetary tightening

AGARTALA: Terming as "very high" the 8.6 per cent inflation, the Reserve Bank today hinted that it could take more policy actions in its review meeting next month.  "8.6 per cent (headline inflation) is very high which needs to be brought down. We would study it and the matter would be reviewed on June 17 next," RBI Governor D Subbarao told reporters here after a board meeting which reviewed monetary and financial developments in the country.  In its annual credit policy meeting earlier this month, Subbarao had made it clear that containing inflation would take precedence over growth, which its pegged at 8 per cent for 2011-12.  Although RBI has already hiked the key policy rates nine times since March 2010, inflation has continued to remain at about nine per cent, which is much higher than the RBI's comfort zone of 5-6 per cent.  Inflation came marginally down to 8.66 per cent in April from 9.04 per cent in March.  Referring to the government's fiscal deficit target of 4.6 per cent for 2011-12, Subbarao said it would be difficult to achieve in view of the impact of rising crude oil and fertiliser prices in the international market.  "It would be very difficult to attain the fiscal deficit target unless there is adjustment on expenditure or tax.. It depends on what decision they take and a number of issues, most importantly on the adjustment of fuel prices," he said.  The government proposes to bring down the fiscal deficit to 4.6 per cent of GDP in the current fiscal, from 5.1 per cent in 2010-11.  Earlier in the day, the RBI opened a sub-office office here with a view to expediting economic development of the North-East region.  Stressing the need for financial literacy, Subbarao said, it would be launched in the entire north-eastern region to educate people about what facilities they could get from banks.  He said about 6 lakh villages having population of more than 2,000 have no access to the banks and the RBI would endeavour to bring those habitations under coverage of banks by March 2012.  When asked if he was aware about circulation of fake currencies in the north-east, Subbarao said he has advised banks to install machines in their branches to identify fake currencies.  He also stressed the need for stringent police action against the racket of circulating fake currencies.