No need for rate hikes: FM

Finance Minister P Chidambaram on Tuesday said current economic situation in the country does not require any sharp adjustment in interest rates, justifying the RBI's decision to leave a key short-term interest rate steady at five per cent in its quarterly policy review.

"The RBI policy statement is in line with what the government thinks. At the moment, I don't think there is a case for any sharp adjustments in interest rates," Chidambaram said after RBI released its quarterly policy review.

The Finance Minister also said the government would borrow less than budgeted level of Rs 1,39,467 crore (Rs 1394.67 billion) this fiscal.

RBI kept bank rate and reverse repo rate unchanged. The reserve repo rate, at which RBI pays commercial banks to borrow overnight, was kept intact at five per cent.

Chidambaram also said the government would ensure price stability and was keeping a close watch on inflation.

"It (price stability) is always on the radar screen. Price stability is always the priority of the Government," he said.

RBI kept inflation estimates for this fiscal unchanged at 5-5.5 per cent. Wholesale Price Index-based inflation rate stood at 4.14 per cent during the week ended July 19.