Finance minister P Chidambaram, whose pro-growth talk has been tempered by a war on inflation, spoke again on Monday of having the best of both worlds after the Reserve Bank cut its overnight lending rate to signal a trend reversal while Western economies worry about bank failures.
“The cut in repo rate is consistent with our objective to moderate inflation as well as ensuring satisfactory growth,” Chidambaram said.
The RBI cut its repo rate to 8 per cent, down 1 percentage point, seeing ground for expanding credit.
After hovering above a worrisome 12 per cent mark for several weeks, the wholesale price-based headline inflation rate has tended to move lower and now stands at 11.40 per cent, enough to nudge RBI to shed its conservatism three days before a scheduled policy revision.
“The credit crunch that the world faces has also impacted us. We have taken a series of measures to infuse greater liquidity and to restart the process of credit,” Chidambaram said.
“Most pessimistic estimates have placed the growth rate at not less than 7 per cent. But, I am confident that the economy will grow at close to 8 per cent,” he said.