Montek supports RBI on tight monetry policy

Planning commission deputy chairman Montek Singh Ahluwalia today came out in support of the tight monetary policy followed by the Reserve Bank of India.

"RBI has done what any central bank would do in a situation where inflation needs to be brought down. It is the right step to moderately tighten the policy," Ahluwalia said.

Ahluwalia expressed confidence that price pressure will moderate with the fiscal measures already taken, along with the prospects of a normal monsoon and good procurement of wheat.

Asked whether monetary tightening will impact interest rates, Ahluwalia said, "An uncontrolled inflation is the biggest upward bias on interest rates.

If these measures succeed in brining the inflation down, they will have moderate impact on interest rates and not a negative impact.