RBI Governor Duvvuri Subbarao played a defensive stroke in his official debut as the chief monetary policy maker on Friday, four days after a surprise interest rate cut that kindled the appetite of investors and companies.
That dampened the mood on a day when bears went on a rampage in the stock markets amid a new low in the global meltdown.
The Reserve Bank of India (RBI) lowered growth forecasts and contrary to expections, kept the signal repurchase (repo) rate and cash reserve ratio (CRR) — the share of deposits banks must park with the RBI — unchanged.
The GDP growth forecast for 2008-09 was revised to a range of 7.5-8.0 per cent from the earlier 8 to 8.5 per cent.
Inflation, which remains at worrisome double-digit levels despite a downward trend in the last few weeks, is pegged at 7.0 per cent by end-March 2009.
RBI’s objective is to continue with the policy of active demand management of liquidity – or enough cash for banks to lend. Finance Minister P Chidambaram said the credit policy was on expected lines.
“RBI will continue to deploy both conventional and unconventional tools. We cannot rely only on conventional measures but we will have to adopt unconventional or unorthodox measures,” he said.
“The central bank – surprisingly –expressed no urgency for further easing at today's policy meeting. Such an outcome is both perplexing and disturbing,” said Rajeev Malik of Macquarie Securities.