FinMin: Policy making must take into account inflation, growth

Even as the Reserve Bank of India maintained a status quo on interest rates in the monetary policy review on Tuesday, the finance ministry said going forward the central bank should examine the liquidity situation, inflation and growth while fixing the policy rate.

India Inc, however, expressed disappointment with the RBI for keeping interest rates unchanged.

“At a time when industrial growth continues to be sluggish, CPI-based inflation is moderating and above all, inflation risks are gradually abating due to improvement in monsoon conditions, the RBI could have taken this opportunity to effect a cut in interest rates,” said CII Director General Chandrajit Banerjee.

“The retention of benchmark lending rate, Repo, at eight per cent, is a clear indication of RBI's pronounced bias in favour of further cutting inflation, which may not help revive growth to the extent of its potential of six per cent in the current fiscal,” Assocham President Rana Kapoor said.

However, industry bodies -- Ficci, CII and PHD -- have welcomed the RBI's decision to lower banks’ minimum bond holding requirements, known as SLR, by 50 basis points, saying the move will help augment liquidity in the system and channelise fund flow to productive sectors of the economy.

“Steps taken by the government to manage food inflation should be followed up with close coordination with the states to ensure that the mitigating impact of the same are seen at the earliest,” Ficci President Sidharth Birla said.

“We believe reduction in the repo rate would be critical to revive the industry sector growth and to refuel growth trajectory in the coming times,” PHD Chamber President Sharad Jaipuria said.