Mumbai: Focusing more on keeping headline inflation under control, the Reserve Bank of India (RBI) on Tuesday left key rates unchanged and projected a growth of 8.5 percent for the economy during the current fiscal (2007-08).
"The policy endeavour would be to contain inflation close to 5 percent in 2007-08, while conditioning expectations in the range of 4-4.5 percent," the central bank said in its quarterly review of its current monetary policy.
The benchmark bank rate, the reverse repo rate, the repo rate and cash reserve ratio (CRR) have all been left untouched, the central bank said and added that management of liquidity will assume priority in the conduct of monetary policy.
Repo rate denotes the discount at which the central bank repurchases government securities from commercial banks to inject liquidity in the system and reverse repo rate signifies the rate at which it absorbs liquidity from banks.
While the bank rate is currently pegged at 6 percent, the reverse repo rate and the repo rate have been notified at 6 percent and 7.75 percent, respectively. The cash reserve ratio stands at 7.5 percent.
RBI Governor Y Venugopal Reddy conducted the quarterly review of the monetary and credit policy, which was keenly waited by not only the Indian industry but also equities traders.
Reddy said the thrust of Tuesday's review was to reinforce the emphasis on price stability and well-anchored inflation expectations while ensuring interest rates environment conducive to maintaining the growth momentum.
"Development in the global financial markets in the context of the subprime crisis would warrant more intensified monitoring and swift responses with all available instruments to preserve and maintain macroeconomic and financial stability," the RBI statement said.
The policy review that seeks to condition inflationary expectations in the range of 4-4.5 per cent comes within days of Finance Minister P Chidambaram's statement that he would be sunk in case there was a high inflation, along with high economic growth.
Highlights of RBI's monetary and credit policy:
- Bank rate kept unchanged at 6 percent
- Reverse-repurchase rate and repurchase rate kept unchanged at 6 and 7.75 percent, respectively
- Cash reserve ratio unchanged at 7.5 percent
- Economic growth projection for 2007-08 retained at 8.5 per cent
- Stated priority of containing inflation close to 5 per cent
- Money supply has accelerated
- Aggregate deposits of banks have grown 14.6 percent
- Non-food credit, although below the projected growth of 24-25 percent given in the Annual Policy Statement, has been picking up since mid-August 2007
- India's foreign exchange reserves increased by $48.6 billion during April-Sep, 2007 as against $13.7 billion in the first half of 2006-07.
- Rupee has appreciated 9.61 percent against the US dollar by Jan 25, 2008
(With IANS, Reuters and PTI)
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