Inflation challenging economy: Gokarn

The newly-appointed RBI deputy Governor Subir said the economy has returned to normalcy.

The newly-appointed RBI deputy Governor Subir Gokarn said the economy has returned to normalcy following the global economic meltdown but faces newer challenges like rising inflation and capital inflows.

“We are getting back to a more normal situation on the macro-economy. That criticality has changed a bit now and we are dealing with a number of other pressures…inflation being one of them…capital flows and the possibility that these will expand and the implications it will bring for currency and reserve management or liquidity management,” Gokarn said in his first interaction with the media here after taking charge.

He said the needs needs to be careful while dealing with these and must not underestimate the impact of fiscal measures taken over the past year while managing the economic crisis.

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“Exit (from a softer monetary policy of low interest rates) is clearly going to have to be done very strategically.

How we balance it,how we sequence it are the challenges that we face. Even as we do that,the risk of upsetting the apple-cart are high and we cannot underestimate them,” Gokarn said.

The massive influx of foreign funds into the domestic stock markets has led to a phenomenal rise in the rupee in the recent past,making the country’s exports uncompetitive in the global market and worrying policymakers.