Asserting that the withdrawal of stimulus is in the best interest of the economy in the current scenario of high inflation, the RBI said that it has started unwinding the emergency measures plugged in during the financial crisis.

RBI said that "The details are not important, but what message you must get is that we have begun in earnest the process of reversing from the expansionary stance.”

Mr Duvvuri Subbarao governor of Reserve Bank of India said that "We started unwinding in October 2009. We terminated unconventional measures first, we raised SLR and brought it back to the pre crisis level, we raised the CRR on the banks by 75 basis points by end of January and another 25 basis points last week. We raised policy rates, once mid-March and again last week by a total of 50 basis points.”

On whether reversal of monetary stimulus was anti growth, he said that "In the near term, perhaps it could be anti-growth. There is certainly a sacrifice ratio there, but even in the long-term and the medium-term, sustained inflation is inimical to growth. So we have got to get inflation under control.”

Noting that getting into the expansionary stance was relatively simple, the RBI governor said the dilemma is how to calibrate the withdrawal. Mr Subbarao said that "The tolerance for error was relatively more. But as we exit over the crisis, I have realized that you got to be much more calibrated, because of the implications of what you do and if you get it wrong the implications can be quite big.”

Referring to the RBI outlook released last week, the growth for the year 2010-11 is projected to be eight per cent plus. He said that "WPI inflation, we believe would be about 5.5% by end of March.”

Mr Subbarao said the Indian banking system had no exposure to tainted assets or stressed institutions and the country's growth emanates from domestic demand and domestic investment as the exports are less than 15%.

(Sourced from FE)