Addressing a meeting here today he said the in the last month inflation was very high in coming days of weak monsoon and ongoing Iraq crises given scope for food and fuel prices.
In May, wholesale prices rose a faster-than-expected 6.01 percent as a 19 percent increase in potato prices during the month pushed up food inflation to 9.50 percent from 8.64 percent in April.
Reserve Bank of India Governor Raghuram Rajan declared that he was not in favor of taking regulation of bond markets away from the central bank by the Narendra Modi govt as the move may hamper development of the market.
However, Rajan said the RBI will not stand in the way if the government wanted to manage its own debt.
The government-appointed Financial Sector Legislative Reforms Commission (FSLRC) has recommended a slew of reforms to overhaul the sector.
"I don't believe the government suffers any less from conflicts of interest in debt management (unlike the views of the FSLRC), but the RBI could well carry out the government's instructions without any loss in welfare," Rajan said in a speech at an industry event.
Rajan said the country is watching the Iraq situation, but despite the uncertainty the domestic economy is better prepared to deal with any shocks on the external front.
The Indian currency tumbled to its lowest level in nearly two months on the worsening geo-political crisis in Iraq.
Brent crude futures held near $113 per barrel with the United States considering air strikes in Iraq as the security situation worsens in the key oil producing country.
"I think as far as the external front goes, we are in a much better position than we were last year," Rajan said on the sidelines of an industry event.
"We have sufficient reserves; the current account deficit is low. So I think one shouldn't worry too much about the external side at this point."
