Inflation continued to show a welcome decline on Thursday with the wholesale price index rising to 11.07 per cent from 11.44 per cent last week. The numbers will come as a big relief to the RBI, which will announce its mid year credit policy review on Friday. Easing inflation and heightened concerns about a dip in growth is expected to ensure that the credit policy this time will prioritize growth over inflation.
Less than two months ago Dr D Subbarao had taken over as the RBI governor and outlined inflation as his primary concern.Now, as he prepares to present his first credit policy, the situation couldn''t be more different as inflation is passé and the primary concern for the RBI is supporting growth.
The inflation numbers released just a day ahead of the policy, showed a steady decline for the latest week down to 11.07 per cent with prices of primary articles and manufactured good seeing a decline.Economists opine that with prices easing this time''s credit policy will be pro-growth. Shubhada Rao, Chief Economist at Yes Bank, said,clearly growth and financial stability will notch up in RBI''s priority. Liquidity is still tight and we expect RBI to act on it. The RBI has already taken dramatic steps in the lead up to the policy, reducing the cash reserve ratio by 250bps to 6.5 per cent and the repo rate by 100 bps to 8 per cent.
But bankers are hopeful that more measures, especially to ease the liquidity situation, will be announced in the Friday policy. Some bankers expect another pre-emptive 50bps cut in the cash reserve ratio. Others hope that the earlier easing on SLR norms may be made permanent and some also expect adjustments in prudential norms.
Less than two months ago Dr D Subbarao had taken over as the RBI governor and outlined inflation as his primary concern.Now, as he prepares to present his first credit policy, the situation couldn''t be more different as inflation is passé and the primary concern for the RBI is supporting growth.
The inflation numbers released just a day ahead of the policy, showed a steady decline for the latest week down to 11.07 per cent with prices of primary articles and manufactured good seeing a decline.Economists opine that with prices easing this time''s credit policy will be pro-growth. Shubhada Rao, Chief Economist at Yes Bank, said,clearly growth and financial stability will notch up in RBI''s priority. Liquidity is still tight and we expect RBI to act on it. The RBI has already taken dramatic steps in the lead up to the policy, reducing the cash reserve ratio by 250bps to 6.5 per cent and the repo rate by 100 bps to 8 per cent.
But bankers are hopeful that more measures, especially to ease the liquidity situation, will be announced in the Friday policy. Some bankers expect another pre-emptive 50bps cut in the cash reserve ratio. Others hope that the earlier easing on SLR norms may be made permanent and some also expect adjustments in prudential norms.
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