The RBI's government bond buyback program - part of its money market operations aimed at helping the market absorb the heavy debt issuance by the fiscally-strapped government - doesn't pose an inflationary threat, Mr. Mohan also said in a recent interview with Dow Jones Newswires.
"We (RBI) look at multiple indicators and act with multiple instruments - we look at financial markets, industrial production, GDP growth, agricultural production, monsoon, bond markets," Mr. Mohan said.
"On one hand, our open market operation program is being done to help the government borrowing and on other hand, it is totally consistent with our monetary program in terms of expectation of GDP growth. It is non-inflation generating. We are not doing (balance sheet) expansion beyond that."
Since mid-September when the global financial crisis deepened, the RBI has flooded money markets with liquidity by cutting interest rates, lowering reserve ratios and, in late March, announcing a program to repurchase government bonds, an effort to support fiscal stimulus aimed at curbing a slowdown in economic growth. A drop in global crude oil prices late last year has helped pull down inflation to near zero levels, giving the RBI more room to ease monetary policy.
From : wsj.com
