New Delhi: Finance minister Pranab Mukherjee on Friday welcomed the Reserve Bank’s decision to keep policy rates unchanged and expressed the hope that inflation would moderate in the coming weeks.
“The need to improve the business sentiments and recover the growth momentum in the remaining months of the current fiscal necessitated a review of the monetary policy stance. I believe that inflation will moderate further in the coming weeks and, therefore, the announcement today is welcome,” Mukherjee told reporters outside the Parliament House complex.
A file photo of finance minister Pranab Mukherjee.
Concerned over economic slowdown, the Reserve Bank of India (RBI) on Friday kept policy rates unchanged. The central bank maintained repo (rate at which banks borrow from RBI) at 8.5%, reverse repo (rate at which the RBI borrows from banks) at 7.5%.
The finance minister also welcomed steps taken by RBI on Thursday to check the rupee’s slide and speculations by imposing restrictions on forward trading in the local currency by FIIs and traders, and by capping banks’ exposure to the forex market.
“I also welcome the governor’s resolve to check the speculative interventions in foreign exchange market which among other factors have contributed to the sharp depreciation of the Indian rupee against the US dollar,” Mukherjee said.
He further hoped that Friday’s announcement should help in regaining India’s growth momentum with improved macro economic parameters in the remaining period of fiscal year 2011-12.
“(RBI) governor has chosen to reflect his concerns on growth which has faltered in the past few months with October IIP reflecting a significant contraction across all industry sectors,“ Mukherjee said.
He also said the “appreciable decline” in food inflation in November has resulted in a dip in headline inflation for November.
A sharp fall in vegetable prices has pulled down food inflation to a near four-year low of 4.35% for the week ended 3 December. Headline inflation in November fell marginally to 9.11% from 9.73% in the previous month.
Inflation in manufactured goods remains firm around 7.7%.