Press Information Bureau
Government of India
Ministry of Finance

25-October-2011 14:09 IST

The Union Finance Minister Shri Pranab Mukherjee has said that the today’s monetary policy announcement by Reserve Bank of India (RBI) would help in getting us back to a more comfortable inflation situation soon while leaving scope for growth to pick up in the second half of current fiscal year. The Finance Minister Shri Mukherjee was responding to the RBI today’s announcement vide which it has increased the policy repo rate by 25 basis points from existing 8.25% to 8.50%. The reverse repo rate has also gone up from 7.25% to 7.50%. The Finance Minister Shri Mukherjee said that the RBI Governor has chosen to reinforce his commitment to moderate inflation and check inflationary expectations, in the face of continued stickiness in headline inflation. Shri Mukherjee said that this has implications for credit costs and investment growth. The Finance Minister said that we are looking at all options for strengthening investment sentiments in the coming months.

DSM/SS/GN

Monetary policy tightening aims to curb inflationary expectations while preserving room for later growth recovery. The Reserve Bank implemented a measured monetary policy tightening by raising policy rates to reinforce commitment to tempering headline inflation and curbing inflationary expectations, accepting that such rate adjustment will affect credit costs and investment growth. The Finance Minister described the move as helping restore a more comfortable inflation trajectory while leaving scope for growth to pick up later in the fiscal year and indicated that the Government will explore measures to bolster investment sentiment.