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Our Bureau

Mumbai , June 7

THE Indian economy is largely insulated from episodes of global financial instability, as the country has over the years built resilience to shocks and is less vulnerable to output volatility, according to the Reserve Bank of India Governor, Dr Y.V. Reddy. Barring supply shocks, in particular those due to international oil prices, inflation, especially the core inflation, had been fairly low, he said.

Dr Reddy was speaking at the eighth meeting of the Bank of International Settlements (BIS) Working Party on Monetary Policy in Asia. The meeting was held for the first time in India.

The meeting focused on current issues in monetary policy. These included growth prospects for Asia, the role of the current IT cycle and its relevance to the Asian outlook and the consequences of higher oil and non-oil commodity prices.

In his inaugural address, Dr Reddy said countries benefit from each other's experience and perceptions despite their own unique characteristics. Over the years policy-making is becoming more globalised as cyclical changes are becoming more synchronised, especially since 1990s. There is increasing convergence in perception, institutional structure, choice of instruments and communication strategy in monetary policy making.

Focussing on the specific features of India, Dr Reddy said the multiple indictor approach followed by the RBI was a logical outcome of the multiple objectives that characterise the monetary policy framework. The enactment of Fiscal Responsibility and Budget Management Act by Parliament provides further flexibility in the conduct of monetary policy. He also drew attention to the data gaps in the conduct of monetary policy in India, especially that on employment.

Mr William White, Economic Adviser and Head of Monetary and Economic Department, BIS, chaired the meeting. Senior executives of central banks of other Asian countries, Canada, Europe, France, Holland, and the US Fed Reserve participated in the meeting.

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