With the Government amply making it clear that the priority was to contain inflation rather than sustain a high growth, the RBI was expected to announce some measures to douse the inflationary trends and lower its indication of anticipated growth rate for the current fiscal.

Corrective measures

RBI Governor Y V Redddy had already termed the above seven per cent inflationary rates on a year-on-year basis as against the RBI’s target of five per cent as ‘’unacceptable’’.  RBI had already taken the sting out of the annual policy statement, when it on April 17 hiked the Cash Reserve Ratio (CRR) by 50 basis points.

The second dose of 25 basis points would take the CRR to eight per cent from May 5. RBI, taking cue from  P Chidambaram’s statement in Parliament on the need for the Apex bank to take corrective measures to check the galloping inflation, came out with the CRR hike, bare two weeks ahead of its annual credit review meeting on April 29. The trade and Industry have already come out strongly against any further hike in the RBI rates stating that it would stunt the growth. FICCI seeking a status quo had said that inflationary trends were due to supply strain constraints and  any change in RBI rates would only further impact the industry.

Any change northward would have a cascading impact on the economy, it felt. Both banking experts and industry leaders accept that the current high inflationary phenomenon was only a passing phase and the government or RBI should not do anything harmful in this phase that would arrest on bright long term growth trends.

SBI Chairman O P Bhatt indicated the possibility of the Apex bank not hiking the rates further, though some foreign investment banks  did not rule out the possibility of 25 basis points increase in the Repo rates.