The Reserve Bank of India (RBI) may reverse its
tight monetary policies once inflation softens, said top economist C. Rangarajan on Saturday.
"By December-January, the inflation would break and a reversal of policy is possible," Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said on the sidelines of Bancon 2011 - a banking conference held here by Indian Overseas Bank (IOB) and Indian Banks' Association (IBA).
According to Rangarajan, the inflation will continue to be high for one or two more months and then soften by this fiscal-end.
Earlier inflation rate was driven by prices of vegetables and food grains but now has spread to manufacturing sector as well, he said.
Queried whether corporate groups were to be allowed to venture into banking, he said the issue needs to be debated and if there are proper applicants, then they should be allowed.
On the infusion of fresh capital in public sector banks, Rangarajan said the government will have to come out with supplementary demands for grants between Rs.4,000 crore and Rs.10,000 crore as against Rs.6,000 crore budgeted for the current year.
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