Rates may remain same after the RBI policy review

Isha Sahni

The Reserve Bank of India (RBI) is going to review its policy on the 3rd The Governor of RBI, Raghuram Rajan is likely to keep rates unchanged when it reviews its monetary policy, its first exercise after the new government came into power in the country.

RBI Governor Raghuram Rajan who is well known for his primary accords to controlling inflation on Friday gave such an indication 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. Food inflation in April stood at 9.66 percent and retail inflation was at 8.59 per cent.

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

Rajan also added the government and the RBI were on the same point on the concerned issue.

“The challenges are very obvious. We have to restore the pace of growth, contain inflation and obviously concentrate on fiscal consolidation itself.” Said Jaitley India’s economic growth remained below the 5 percent mark for the second year in a row at 4.7 percent in 2013-14.

According to a report in PTI, “RBI is likely to maintain status quo as inflation is still high and there is threat of monsoon being weak this time looming large,” Indian Overseas Bank Chairman and Managing Director M Narendra.

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.

“Governor’s job would become much easier as he along with others can see much higher level of commitment to reduce the inflation, both at the WPI and retail level,” Assocham president and Yes Bank Managing Director Rana Kapoor said.

Wholesale inflation of food products under manufactured items is under 2 per cent, while items such as sugar, edible oils and cement and lime have shown a negative trend, it said.

A target has been set by Rajan 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.