Inflation will come down; no fear of recession: Finmin

The government on Tuesday said inflation will come down to a more realistic level, as has been indicated by the Reserve Bank of India, but there is no fear of recession. "Falling inflation is not indicative of coming recession in the economy...No fear of recession," Economic Affairs Secretary Ashok Chawla said, while commenting on the third quarterly review of the credit policy announced by the Central Bank. Noting that inflation is coming down to a more realistic level, he said,"... definitely it shows that demand has slowed down. What we have is a situation of downturn and not recession." Having touched a peak of 12.91 per cent in August 2008, inflation came down to below 6 per cent in January and according to the RBI's assessment of economy, the rate may slip further to 3 per cent by March end. Referring to availability of funds Chawla said, "RBI has taken steps and there is adequate liquidity in the system... but transmission of credit has to be more effective." The RBI, he added, would continue to monitor situation and take steps as and when needed. As per the RBI review, the central bank has since mid- September augmented actual/potential liquidity by about Rs 3,88,000 crore. Although the RBI has been gradually reducing key policy rates and ratios, it refrained from taking any major initiative during the third quarterly review of the policy.