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RBI policy remains the same

Mumbai, July 30 () : RBI Governor reviewing monetary policy today left the repo rate at 7.25% and CRR at 4% unchanged.

D. Subbarao, the RBI Governor, as per market expectations left policy rates and CRR at previous review done three months back. Rao’s term comes to an end in September. RBI however pegged the economic growth to be 5.5% of GDP, revising the earlier estimate of 5.7%.

From April last year, RBI started cutting rates to bring it to present level. Raising cash reserve ratio of the banks held daily to 99%, the rates for marginal standing rate at 10,25% was to squeeze funds and curb the rupee fall.

Still the Indian currency is hovering around 60. The coming US Fed report is all important; as it further eases stimulus then investors will flee Asian markets for investment in dollars. This move would lead to further rupee decline.

The macro- economic report of RBI is rather gloomy. It says wholesale prices stands at 4.8% but consumer price index which shows prices in retail market at 9.87%. This was the frequent fuel price hike and declining rupee. The external debt makes the apex bank to downsize GDP growth from 5.7% to 5.5%.

RBI said that once the volatility of rupee stopped, then the recent measures would be withdrawn in a phased manner. It will then go back to moves aimed for growth. It hopes to contain the inflation to 5 %.

At noon, the rupee lost 0.23% to trade at 59.56 after RBI policy review. It opened at 59.56. It closed yesterday at 59.42. CII has expressed disappointment over the RBI policy offering nothing for growth and cutting GDP forecast shows the real situation.

Kanoria, ex-President FICCI says that RBI offers nothing to spur growth and bring in investors. Analysts feel that rupee will fall further and now that RBI has shown that it is committed to protection of rupee, it will further tighten the liquidity.