RBI may hike CRR, policy rates further this year: Macquarie

An expected surge in inward capital flows might prompt the Reserve Bank to hike its cash reserve ratio and policy rates further in 2010, a top economist said.

An expected surge in inward capital flows might prompt the Reserve Bank to hike its cash reserve ratio and policy rates further in 2010, a top economist on Thursday said.

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"RBI has been proactive (in its policy actions)... They remain serious about the inflation and the impact of capital flows in the domestic market," Macquarie Securities, Global Head of Economics, Richard Gibbs told reporters in Mumbai.

There is a likelihood of the apex bank hiking the CRR, amount banks keep with itself by another 0.75 per cent and policy rates by one per cent in the current year, Gibbs said.

Exiting from its accommodative policy stance, Reserve Bank last week hiked its cash reserve ratio, which is the amount banks have to park with the apex bank, by 0.75 per cent, sucking out Rs 36,000 crore liquidity from the system.

The RBI, which retained the other policy rates, also upped the GDP growth target to 7.5 per cent and inflation projection to 8.5 per cent for the current fiscal.

Reforms in agriculture sector and increased investments in the infrastructure segment would play key roles in the economy as it strives to return to the earlier high growth trajectory, Gibbs said.

According to him, on the back of their strong economic fundamentals, India and China will lead the global economic recovery.