Rates steady; govt criticises RBI

Rates steady; govt criticises RBI

The Reserve Bank of India on Wednesday decided to keep interest rates unchanged, prompting criticism from the government.

Seldom in recent times have conditions warranted policy easing as much as they do now, Chief Economic Adviser Arvind Subramanian said, minutes after RBI announced its decision. “Real policy rates are tight and rising at a time of low inflation and slowing growth,” he remarked.

Subramanian also said the RBI’s inflation forecast errors had been large and systematically one-sided. His comments assume significance in the wake of a six-member monetary policy committee unanimously turning down a finance ministry request for a meeting ahead of the review, thereby asserting its autonomy.

‘Govt vs RBI’
An analyst wondered, “Is it the government versus RBI again?” Such sharp reactions from the finance ministry were common during the erstwhile UPA regime.

P Chidambaram, then finance minister, had said, “If the government has to walk alone to face the challenge of growth, then we are ready to walk alone”, after the RBI, with D Subbarao as governor, chose to keep policy rates unchanged.|

India Inc also said a cut in lending rates was called for, given that domestic private investments had been on the wane. “Also, GDP numbers released last week clearly reflect the effect of demonetisation panning out in the fourth quarter of the last fiscal year,” the Federation of Indian Chambers of Commerce and Industry said in a statement.

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