RBI policy review Tuesday likely to hold rates

By Sarkaritel June 2, 2014 11:20

RBI policy review Tuesday likely to hold rates

New Delhi, June 2 The Reserve Bank of India (RBI) is likely to keep rates unchanged when it reviews its monetary policy Tuesday, its first exercise after the installation of the new union government.

Known for the primacy he accords to controlling inflation, RBI Governor Raghuram Rajan gave an indication Friday when he told reporters in Tokyo that the “government and the central bank have both stressed on the need to bring down inflation while respecting the fact that growth is very weak”.

The RBI is expected to keep its repo rate (at which it lends money to commercial banks) unchanged at 8 percent.

Earlier, talking to reporters after meeting newly sworn-in Finance Minister Arun Jaitley, Rajan had said: “RBI has always maintained the balance between growth and inflation.”

Rajan added the government and the RBI were on the same page on the issue.

Jaitley said: “The challenges are very obvious. We have to restore the pace of growth, contain inflation and obviously concentrate on fiscal consolidation itself.”

Rajan raised interest rates three times since he took office in September 2013, even as economic growth slowed to decade-low rates.

India’s economic growth remained below the 5 percent mark for the second year in a row at 4.7 percent in 2013-14.

Growth remained subdued at 4.6 percent in the fourth quarter of 2013-14 and during the entire fiscal, mainly due to a decline in manufacturing and mining output.

Rajan has set a target of bringing down consumer price inflation to 8 percent by the end of the fiscal, and to 6 percent by the next fiscal.

Retail inflation (consumer price index) was at 8.59 percent in April year-on-year, after running near or above 10 percent for almost two years through 2013.

By Sarkaritel June 2, 2014 11:20

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