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RBI policy reflects cautious stance: Montek

Press Trust of India / New Delhi 31 Jul 12 | 04:20 PM

Planning Commission today said that RBI has taken a cautious stance due to sticky inflation in its quarterly review of monetary policy by keeping the key rates unchanged.

"As far as looking ahead is concerned, the RBI has taken a slightly cautious stance because of its concerns that inflation is sticky. I have no difficulty with that," Commission's Deputy Chairman Montek Singh Ahluwalia told reporters here.

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"They (RBI) are looking (at a situation) that if the Monsoon does not improve, then there may be some pressure on that (inflation) front. There is no harm (in) being little cautious on this," he added.

In its quarterly monetary review unveiled today, RBI kept its key rates like lending, borrowing and CRR unchanged. However, the Statutory Liquidity Ratio (SLR) -- the amount of deposits banks park in government bonds -- was reduced by one% to 23%.

On the RBI lowering economic growth projections to 6.5% this fiscal from 7.3% earlier, Ahluwalia said, "As far as reduction in growth rate is concerned, I agree that growth rate is going to be lower than what was projected at the time of budget."

"They have chosen 6.5% (economic growth for this fiscal), I think that is quite reasonable. If we grow at 6.5% in current year, then it will be actually a good performance. It will require pick up from the performance of the last quarter (January-March) of previous fiscal year," he added.

During the fourth quarter of last fiscal, the economy had grown at a nine-year low rate of 5.3%. During the entire fiscal of 2011-12, the economy grew by 6.5%.

Asked whether RBI's almost status quo on monetary policy will affect investments, he said, "I don't believe that investments are affected by what happens to the short term repo (lending) rate. This is one of the biggest problems in perception."

There are many things which need to be done to revive investor sentiment, he said.

"A lot of that has to do with project implementation. Removing obstacles and movement of big projects. We are doing that,"  he added.

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