The Reserve Bank today slashed its key interest rates by 0.25 per cent to 7.75 per cent . The Chairman of the Prime Minister's Economic Advisory Council, Dr. C. Rangarajan said that cut in interest rate will stimulate investment and help in anchoring inflationary expectations.
The RBI Governor, D.Subbarao hailed government's recent reform measures including liberalisation of FDI in retail, deferment of GAAR and progressive deregulation of fuel prices .He said these steps will help engender stable macroeconomic conditions and return the economy to its high growth trajectory.
The Deputy Chairman of Planning Commission Montek Singh Ahluwalia said that CRR cut provides more resources with the banks and enable the banks to do more lending. He however said that the monetary policy is not only thing that will change the micro economic situation.
The apex bank today released the third quarter of monetary policy. It announced a cut in the cash reserve ratio by a margin of 4 percent. The RBI, however, has reduced the growth projections for the current financial year to 5.5 per cent from its earlier estimate of 5.8 per cent.
On inflation, it moderated the rate to 6.8 per cent for March-end from earlier projection of 7.5 per cent. The repo rate, which was cut last in April 2012, stands revised at 7.75 per cent with immediate effect, while the liquidity infusing CRR stands at 4 per cent effective February 9th.
Inflation has been the prime inhibiting factor that has prevented the RBI from cutting repo rate in the last nine months, which have seen a host of liquidity infusing measures like a cut of 1.75 per cent in CRR, government bond buybacks and a one percentage point cut in SLR.
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