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"Today`s meeting was a routine administrative one. Next week I will come back and brief the Finance Minister about the macro economic policy before the monetary review on April 17," the RBI Governor told reporters after the meeting.
The Reserve Bank of India (RBI), which increased key policy rate 13 times between March 2010 and October 2011 to tame inflation, did not hike the repo rate (short term lending rate) in the last three policy reviews.
Industry has been complaining that the high interest rate regime is impacting economic activity and has demanded cut in policy rates, as inflation has started moderating. During the April-January period this fiscal, the Index of Industrial Production (IIP) growth stood at 4 per cent, as against 8.3 per cent in same period in 2010-11.
The HSBC India Manufacturing Purchasing Managers` Index (PMI) indicates that India`s manufacturing sector witnessed the third consecutive month of decline in March as output and new order growth weakened.
Wholesale price-based inflation, which remained high during most of 2011, has started showing signs of moderation.
It was 6.95 per cent in February. Meanwhile, Assocham President Rajkumar Dhoot has urged Subbarao to cut the repo rate by at least 50 basis points from the current 8.5 per cent to reduce the cost of borrowing to encourage fresh investments and spur growth. The chamber also demanded 75 basis cut in CRR to enhance liquidity.
"The economy is going through a very difficult patch and business confidence has plummeted. New investments have slowed down," said Dhoot during his interaction with RBI Governor. He said the monetary tightening has added to the low business confidence and affected investments.
