New Delhi: The Union government on Wednesday expressed confidence that Reserve Bank’s decision to raise the short term lending interest rate for banks and statuary deposits with the Central bank by 50 basis points each would help contain inflation without hurting the economic growth.
“The objective of the RBI is to moderate and manage aggregate demand. The intention is to achieve the objective while ensuring that the prospects for overall economic growth remain positive,” said a Finance Ministry statement issued here.
It noted that these steps were necessary in the face of rising inflation, which has crossed 11% mark, due to relentless increase in crude oil prices.
The crude oil prices on the NYMEX have gone up from $134.63 per barrel on 20 June, the trading day preceding the Jeddah meeting of major oil producing and consuming countries, to $136.80 a barrel, the statement said.
Welcoming the decision of the Central Bank, the Finance Ministry said, “the policy stance adopted by the RBI should boost the confidence of investors both domestic and foreign, and augur well for economic growth.”
These steps are expected to have a salutary effect, it said adding the ministry had indicated on last Friday that the monetary authorities were expected to take action on the demand side to moderate inflation and quell inflationary expectations.
Referring to comfortable position of foodgrain stocks in the country, the ministry said agricultural performance had improved along with strong and resilient external sector with modest current account deficits. The level of foreign exchange reserve is also comfortable, it added.