The RBI in its first quarterly monetary policy today for the current fiscal kept all key rates unchanged. The Cash Reserve Ratio (CRR), the money parked by banks with the RBI has also been kept unchanged at 4.75 per cent, while the repo rate, the rate at which RBI lends to banks has been retained at 8 per cent.
Consequently, the reverse repo rate, the rate at which RBI borrows from banks, will remain unchanged at 7 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 9%. The RBI has cut the Statutory Liquidity Ratio (SLR) from 24 per cent to 23 per cent. Inflation forecast has been raised to 7.3 per cent from 6.5 per cent as earlier projected.
Speaking to reporters in Mumbai,RBI governor , D. Subbarao said that the primary focus of monetary policy remains inflation control in order to secure a sustainable growth path over the medium term.
The RBI Governor reduced the GDP growth forecast to 6.5 per cent from 7.3 per cent as earlier projected in view of the ongoing global economic slowdown, deficient monsoon rains and subdued prices of petroleum products.He said that inflation may also go up to 7.3percent.
The RBI has also advised the government to take immediate steps to control fertilizer and fuel subsidies and keep them under two per cent of GDP.
Deputy Chairman, Planning Commission, Montek Singh Ahluwalia has said that Reserve Bank has taken a cautious stance in its quarterly review by keeping the key rates unchanged. He said in New Delhi that the cautious stance has been taken due to sticky inflation.
He added that if monsoon does not improve, then there may be some pressure on the inflation front.
The Chief Economic Advisor to Finance Ministry, Kaushik Basu has described the RBI move right by not changing the key rates. Speaking to newsmen on his last day at office, he said, India's inflation is much less in comparison to other countries.
He expressed hope that the inflation will be below seven per cent by the end of September. Mr. Basu asserted that despite some impact of slowdown on Indian economy, New Delhi can emerge as a leading economy of the world. He ruled out that India is facing the problem of stagflation.
