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Wednesday, November 11, 2009

RBI may withdraw stimulus if inflation rises: C Rangarajan

The Reserve Bank of India may withdraw some monetary stimulus if inflation rises towards the end of 2009, C. Rangarajan, chairman of the Prime Minister's economic advisory council, said on Wednesday.

"If inflation pressures develop, monetary authorities may take measures earlier. RBI (Reserve Bank of India) will wait and see how price situation develops in Nov-Dec," Rangarajan said.

The fiscal deficit needed to be reduced by 1 to 1.5 percentage points in the next
fiscal year, he said.

"Next year we might have to start the process of withdrawing some of the measures," he said referring to the fiscal stimulus, adding that excise duties needed to be adjusted while the government's expenditure needed to be cut in 2010/11.

World Bank President Robert Zoellick said the world needed a cooperative approach to exit from easy fiscal and monetary policies and the timing for Asian central banks would depend on markets.

Speaking to reporters at the Singapore Foreign Correspondents Association, Zoellick also said that asset bubbles in east Asian economies could undermine confidence.

He said earlier on Wednesday that governments should not remove stimulus measures next year.

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