The RBI said the policy focused on conditioning perceptions for inflation in the range of 4-4.5 per cent so that an inflation rate of around 3 per cent became a medium-term objective consistent with India’s broader integration into the global economy.
According to the RBI, the finances of the central government could be pressured by higher government salaries, a cut in petroleum product duties, higher oil and fertiliser subsidies and compensating banks for waiving debts of small farmers. A survey of professional forecasters by the RBI in June predicted the economy would expand 7.9 per cent in 2008-09, lower than the previous prediction of 8.1 per cent.
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