Montek Singh Ahluwalia calls RBI's rate hike 'right move'

Posted By: Biswajeet Panda
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Montek Singh Ahluwalia
New Delhi, Jun 16: While the Reserve Bank of India's move to raise key interest rates is being panned by one and all, Montek Singh Ahluwalia, the Deputy Chairman of the Planning Commission has sprung to the support of the apex bank.

The Reserve Bank of India, on Jun 16, raised the key short-term lending and borrowing rates by 25 basis points each today for the 10th time since March, 2010.

Insisting that RBI's move to raise the lending rates, will not hamper the growth, which is projected at 8.25 per cent to 8.5 per cent for the current fiscal, he said, "I think it is certainly the right move (of RBI) to contain inflation. This is a widely expected move."

The Deputy Chairman of the Planning Commission also added, "I don't think it will impact economic growth. I have already said it would not be 9 per cent this fiscal. It would be in the range of 8.25 to 8.5 per cent, which is a reasonable thing to plan for."

Analysts say that the RBI's move to raise interest is part of efforts, by the apex bank to rein in surging inflation. Inflation in the country stood at above nine per cent in May 2011.

On RBI's concern about the surging inflation, in its mid-quarter review over rising prices, he said, "Inflation remains in the worrying area. Therefore, it is entirely right that both the monetary and fiscal policy should be supportive of containing inflation."

Explaining the logic behind lowering the growth projection from nine per cent this fiscal to 8.25-8.50 per cent, Ahluwalia said,"The reason for lowering economic (growth) projection is that farm output growth would not be as high this fiscal as 6.6 per cent, which was recorded in 2010-11."

Earlier today, Jun 16, the RBI raised the short-term lending (repo) rate to 7.5 per cent and the borrowing rate to 6.5 per cent.

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