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No rate cut: Both praises and brickbats for RBI

Last updated on: July 31, 2012 19:20 IST

No rate cut: Both praises and brickbats for RBI

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For the second consecutive time, the Reserve Bank of India (RBI) on Tuesday left the key interest rates unchanged in its attempt to fight inflation.

The central bank also lowered the growth projection for the current fiscal to 6.5 per cent.

Indian industry is disappointed with RBI's decision to leave interest rates unchanged and said an opportunity is lost in reviving the growth momentum in the economy.

"Industry is under a grip of a slowdown and the private sector has been postponing investment decisions due to rising interest costs. Growth of bank credit to the commercial sector has gone down as the private sector is delaying investment due to high cost of credit," CII said in a statement.

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Image: K C Chakrabarty, Deputy Governor, RBI, D Subbarao, Governor, RBI, Subir Gokarn, Deputy Governor(L to R).
Photographs: Sahil Salvi.

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No rate cut: Both praises and brickbats for RBI

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RBI policy reflects cautious stance: Montek

The Planning Commission on Tuesday said that RBI has taken a cautious stance due to sticky inflationin its quarterly review of monetary policy by keeping the key rates unchanged.

"As far as looking ahead is concerned, the RBI has taken a slightly cautious stance because of its concerns that inflation is sticky. I have no difficulty with that," Commission's Deputy Chairman Montek Singh Ahluwalia said.

"They (RBI) are looking (at a situation) that if the Monsoon does not improve, then there may be some pressure on that (inflation) front. There is no harm (in) being little cautious on this," he added.

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Image: Montek Singh Ahluwalia.
Photographs: Reuters.

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No rate cut: Both praises and brickbats for RBI

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'Interest rate cut would have given a wrong signal'

Justifying the decision of the Reserve Bank to keep key policy rates unchanged to check inflation, Prime Minister's economic advisor C Rangarajan said on Tuesday interest rate cut would have given a wrong signal.

"The efforts of RBI were best to contain inflation. RBI has struck an appropriate balance to control inflation and to provide stimulus to growth. Repo rate cut would have sent a wrong signal since inflation is high," said Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister.

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Image: D Subbarao, Governor, RBI.
Photographs: Sahil Salvi.

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No rate cut: Both praises and brickbats for RBI

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RBI decision to retain interest rates 'right move'

Describing the RBI decision of not cutting key interest rates to check price rise as the "right move", outgoing Chief Economic Advisor Kaushik Basu the expressed hope that inflation would come down tobelow 7 per cent in September.

"My expectation is that inflation in the month of September will go below 7 per cent," he said while commenting on the RBI decision to keep interest rates unchanged for the second time in a row. 

"RBI has said pause. RBI has made a right move and the lowering of SLR is a very important small move (will) give right indication," Basu said. 


Image: Kaushik Basu.

Tags: RBI , Kaushik Basu , SLR

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