While the buffer stock of foodgrains and better supply management could mitigate the adverse effects to an extent, imports are not an easy solution given the requirement. Although inflation pressures emanating from higher food prices may limit the scope for monetary policy action, there are implications for inflation expectations. Furthermore, unlike the major advanced economies, growth remains positive.
Real GDP growth was 6.7 per cent in 2008-09 and is expected to be 6.0 per cent (with an upward bias) as per the Reserve Bank’s July 2009 projections. In view of the country specific features, we may need to exit from accommodative monetary policy earlier than advanced economies.