RBI kept key rates unchanged to push growth, says Montek

The Reserve Bank's decision to keep interest rates unchanged is aimed at boosting economic growth, Planning Commission Deputy Chairman Montek Singh Ahluwalia has said.

"Keeping in mind, the need to give the economy stimulus and not wanting to take too hasty a step, the (RBI) Governor has surprised the markets.

"Markets were expecting a hike," Ahluwalia told reporters in New Delhi.

"He (RBI Governor Raghuram Rajan) is expressing confidence that price inflation will come under control and let's hope that he is right. If he is right then definitely in retrospect it will be proved to be very good decision," he added.

In its mid-quarter review of monetary policy, RBI on Wednesday kept all key interest rates unchanged notwithstanding persistent high inflationary pressure.

The decision to keep rates unchanged will be a big breather for the industry and retail borrowers in particular as the markets had expected another 25 bps hike in the short-term lending rate.

According to Ahluwalia, the RBI thinks that recent indication do suggest that pressure on inflation will come down, which is mainly because of the food prices.

The spike in prices of food items is seasonal in nature generally and RBI expects the food inflation to ease in coming weeks.

"RBI Governor has said that there is some expectation that high inflation which is largely driven by food inflation and that too mainly driven by vegetable inflation, will ease," he added.

The retail inflation for November this year was at 11.24 per cent while the headline inflation measured in terms of Wholesale Price Index was at 7.52 per cent during last month.

Image: Montek Singh Alhuwalia. Photographs: B Mathur/Reuters