Reserve Bank of India [Get Quote] Governor D Subbarao on September 9 said the central bank will take fresh steps only after studying the impact of measures announced earlier. The regulator will also closely monitor growth drivers and volatile global situation, he said.

In his first press conference after assuming charge last week, Subbarao said the demand-side measures had started showing their impact on food and metal prices, among the key reasons for a steep rise in inflation.

"I am not sure whether we can say inflation is softening consistently, but the decline in the Wholesale Price Index is satisfying. The inflation momentum is coming down,'' he told reporters during a 30-minute interaction.

While making it clear that he will continue with the strategy followed by RBI so far on inflation and exchange rate management, the former finance secretary said, "All I can say is that we will be monitoring the situation closely and continuously, be mindful of implications of our monetary stance on the growth prospects and take action as appropriate." 

Soon after he took over from Y V Reddy on Friday, the new central bank chief had made it clear that combating inflation will be accorded a top priority. Even on Tuesday, he said the monetary tightening by RBI was aimed at moderating demand and no one should be surprised to see some slowdown in the economy.

Inflation, based on WPI, fell to 12.34 per cent for the week ended August 23, after touching a 16-year high of 12.63 per cent two weeks earlier. RBI has raised the repo rate and the cash reserve ratio by 125 points each to 9 per cent in an attempt to tame inflation.

The monetary tightening in the previous years is already showing its impact, with the GDP growth rate during the first quarter estimated at 7.9 per cent. During 2007-08, the Indian economy grew 9 per cent.

While sticking to RBI's growth of 8 per cent during the current financial year, Subbarao said, "The recent moderation is only a cyclical downturn. The structural India growth story is still intact and credible."

"The monetary policy is effective in a country like ours too. Though the origins (of inflation) are on the supply side, demand management has to be a part of the solution," he said, adding that demand management will also help the poor.

Responding to the criticism of RBI putting controls on capital flows to check appreciation of the rupee after exchange rates turned volatile, Subbarao said the policy adopted by the central bank "has served us well" and he intended to stand by it. The rupee, which is now trading below 44 against the dollar had touched the 39 mark less than a year ago due to a surge in inflows.