The Reserve Bank of India chief said on Friday the inflation outlook was uncertain due to volatile global crude oil prices which have risen on war risks, and firm oilseeds and edible oil prices.

"For the year as a whole, inflation is expected to remain within 4 per cent in the current year," Bimal Jalan said in a speech to bank economists in Bangalore.

A copy of the prepared speech was made available to reporters in Mumbai.

India's year-on-year inflation rate measured by the wholesale price index fell to 3.15 per cent in the week ended December 7 from 3.40 per cent in the previous week.

Jalan reiterated that with foreign exchange reserves rising above $68 billion, the stance of the monetary policy continued to be soft to provide adequate liquidity to banks to meet credit growth and investment demand.

"Monetary policy also renewed its commitment to monitoring conditions in the foreign exchange market with watchfulness as well as flexibility," Jalan said.

The rupee has gained 2.2 per cent to 48.02/03 since it hit a lifetime low of 49.08 per dollar in mid-May, but is still undervalued by nearly three per cent on a trade-weighted basis because of the dollar's sharp fall against major currencies.

The rupee is on course to finish 2002 stronger, making it the first rise in a decade. The unit ended 2001 at 48.2450/2500 and has always depreciated against the dollar by an average of three to four per cent annually in the past 10 years.

GDP growth likely to be 5-5.5%: Jalan
Jalan says liquidity management a problem