In fact, the central bank is cautious that its measures do not pull down demand and hence is only giving "signals" to cool down the runaway inflation which is already nearing 10 per cent mark, Sen said. "The RBI needs to be cautious and they has been cautious; what they are doing now is just signalling and not compressing demand," Sen said.
Sen's remark assumes importance amid intense speculation that the banking watchdog will further suck out money supply and make cost of borrowing higher in its April 20 monetary policy to cool down inflation. Governor D Subbarao recently said the apex bank would continue its exit from the monetary stimulus to check high inflation and ensure sustainable economic growth.The RBI raised its key short-term rates by 25 basis points last week to cool down inflation.
Sen said certainly it is a matter of concern that non-agriculture inflation is picking up and is already over 7 per cent. He said overall inflation could cross 10 per cent and would peak in March from 9.89 per cent in February. However, at this point the central bank should be careful as final figure for aggregate demand in the economy is yet to come up, Sen said. The aggregate demand for the entire fiscal would be known by May end when the figures for GDP during 2009-10 would be released.
Economic growth slowed down to 6 per cent in the third quarter of this fiscal after a stunning expansion of 7.9 per cent in the previous quarter. In the first quarter, the economy grew by 6.1 per cent. As such, economic growth in the fourth quarter has to be more than 8 per cent, if advance estimates by Central Statistical Organisation of 7.2 per cent for the entire fiscal is to be achieved.
The fourth quarter figures will come by May-end. That is what Sen suggested when he said the central bank should be suggested as final figure for aggregate demand is yet to come.