At a time when inflation is hovering around 6 per cent, Reserve Bank on Friday said that a 5 per cent inflation this year is "certainly possible" and that India is likely to be "less affected" by global imbalances."A five per cent inflation is certainly possible...there is no inflation targeting in India but there is an inflation acceptance consensus," RBI Governor Y V Reddy said after opening a conference on emerging challenges to financial system.
The Reserve Bank, in its Annual Credit Policy, had lowered inflation target close to 5 per cent for this fiscal as against 5-5.5 per cent for the last year. It has promised to keep inflation at 4-4.5 per cent in the medium term.
The Reserve Bank has lowered the target despite the fact that inflation appears to be beyond expectations in the last few weeks despite several fiscal and monetary measures.
But any monetary policy action has lagged effect and Reserve Bank's optimism to bring it down to 5 per cent stems from the fact that its measures will start yielding results in the coming weeks.
Reddy did not agree with his detractors, saying had the apex bank not taken the tough measures for hiking key rate and cash reserve ratio several times in the last few months inflation would have been much higher.
"The policy had some role to play in inflation outcomes and it made some reasonable assessments," he said.
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