In fact over two months during this period, the year on year inflation was negative, when many had started asking RBI whether India faces the risk of deflation. How then the inflation situation deteriorated so fast thereafter? It happened over successive phases, with contribution to the inflation build-up coming from different items covered in the WPI.
In addition, we expect foreign reserves to be supplemented by inflows related to oil exploration activities and by proceeds of foreign loans. With official reserves now equivalent to around 12 months import cover, the Bank is not targeting any additional increase in official reserves in 2011. 11. A brief word on the foreign exchange market.