Congress favours status quo in interest rates

New Delhi, Apr 12 (UNI) Concerned over the headline inflation rate touching 7.41 per cent, the Congress today expressed the hope that the RBI would not increase the interest rates in its monetary policy, being announced on April 29, as part of measures to contain inflation.

It also suggested a hike in rupee exchange rate to bring down rising inflation in the past few months.

The Congress Party, which heads the ruling UPA coalition, has the feeling that a further rise in interest rates 'at this stage' may not be of much use and may, in fact, lead to reduction in growth prospects rather than help in containing inflation.

It also wants some increase in the rupee exchange rate in order to reduce inflation.

The Party's thinking was articulated by AICC General SEcretary in charge of Media Veerappa Moily at a press conference here in the context of the inflation reaching 7.41 per cent.

"As far as the monetary policy is concerned, the RBI is an independent authority and will take an independent and appropriate action in order to meet the objective of growth without inflation," Mr Moily said.

In this context, he said the RBI had already tightened the monetary policy considerably even prior to the present bout of inflation which underscored the fact that the present inflation was not a demand-driven but was a result of other factors on supply side including global supply shortages in food and commodities.

"Since the RBI has already moderated the demand side cosniderably, a further rise in interest rates at this stage amy not be of much use," he said.

Referring to the other macro-economic policy parameter-the rupee exchange rate, Mr Moily said the RBI had interevened in the past to moderate the appreciation of the rupee. But when there was a trade off between exporters as a group and India as a whole, it should be obvious that the interests of the country as a whole had to prevail, even if this meant some increase in the rupee exchange rate in order to reduce inflation.

In this context, he said the interests of exporters could in any case be safeguarded by specific schemes targeting them.

UNI SH GL AS2004