Mukherjee appreciates Reserve Bank of India’s Monetary Policy Review

NEW DELHI - Commending the Monetary Policy Review by the Reserve Bank of India, Union Finance Minister Pranab Mukherjee said on Tuesday that the changes announced by the RBI complement the Government’s efforts to steer Indian economy to grow better and harness inflation.

In his reaction on the Monetary Policy Review of the RBI announced today, the Finance Minister observed that the present time was not so easy for RBI to take major monetary decision, especially which are related to monetary policy.

“There are times when all informed observers have a common view of what the imperatives of monetary policy are. In such times the RBI’s decision is easy. Today is not such an easy time. The signals from the economy have been mixed. Industrial growth showed a slight slowing down in August, which is the last month for which we have detailed data. Inflation, while less than what it was some months ago, is still not in a zone where we can sit back.”

In the latest Monetary Policy Review, Pranab said, the RBI has decided to leave the SLR (statutory liquidity ratio) and CRR (cash reserve ratio) unchanged and raise the repo and reverse repo rates by a small amount, namely 25 basis points. “I respect this decision made in a difficult time. This will create some monetary tightening in the country, without narrowing the LAF (liquidity adjustment facility) corridor,” he stated.

Stating that this tightening may have a small negative impact on the growth rate, Pranab said, “but I expect such an effect to be only a short run one. In the medium to long term, the changes announced by the RBI today should actually help Indian Economy to do better in terms of growth.”

He said last week there was concern about liquidity shortage, when RBI was injecting a lot of credit through the repo window.

“Let me clarify that this is a very short-run phenomenon, caused by the huge oversubscription to the IPO by Coal India. In some sense this liquidity shortage shows the market’s confidence in our industry and its eagerness to invest in it. I am glad that the RBI has risen to the challenge and used a very careful combination of policies to complement what the Government of India is doing to steer our economy to grow better and harness inflation,” said Mr. Mukherjee. (ANI)