Press Information Bureau

Government of India

Ministry of Finance

02-December-2011 18:5 IST

As per the Index of Industrial Production (IIP) released by the CSO, the industrial growth has moderated to 5.0 percent in 2011-12 (April-September) as compared to 8.8 percent in corresponding period of the previous year. The moderation in the industrial production can be partly attributed to increase in the interest rate.

The Reserve Bank of India (RBI) has been increasing policy rate as a part of monetary policy stance since March 2010 to contain inflation and inflationary expectations. In the forward guidance of the Second Quarter Review of Monetary Policy 2011-12, RBI has reported that notwithstanding current rates of inflation persisting till November, the likelihood of a rate action in the December mid-quarter review is relatively low. Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted.

This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to an Unstarred Question in Lok Sabha today.

DSM/ Hb

Monetary policy interest rate increases aimed at containing inflation; further hikes conditional on inflation trajectory. Increase in policy interest rates has been used as the principal monetary policy tool to contain inflation since March 2010; the press release attributes moderation in industrial growth partly to higher interest rates. The Reserve Bank of India's forward guidance indicates a low likelihood of immediate further rate action and states additional hikes may not be warranted if inflation follows projected trajectories, highlighting the conditional nature of future policy decisions.