Finance Minister Pranab Mukherjee listens to a question during a news conference in New Delhi May 27, 2009. The government said on Tuesday it would seek again to reach agreement on a controversial increase in fuel prices to help improve its fiscal positio
Finance Minister Pranab Mukherjee listens to a question during a news conference in New Delhi May 27, 2009. Reuters

The Finance Minister, Pranab Mukherjee has appreciated that the monetary policy tightening by Reserve Bank of India (RBI) in its mid quarterly policy review by increasing interest rates.

RBI decided to increase the repo rate by 25 basis points to 6.0 percent and reverse repo rate by 50 basis points to 5.0 percent on Thursday.

Mukherjee said that the RBI’s policy changes would help us navigate this situation more effectively.

The RBI has made a mid quarterly decision which enables it to take small measures which do not jolt the markets beside giving a good signal for inflation control and leave India’s remarkable growth story unaltered, he said.

The Finance Minister was happy after that the RBI has decided not to tighten the cash reserve ratio from the existing 6 percent.

The narrowing of liquidity adjustment facility corridor should contribute towards a more efficient monetary policy, the Finance Minister added.

He said that this should also encourage a greater absorption of liquidity by the Central Bank and contribute to further control of inflation.

The food price inflation is on a long run downward trend but still running high, said Mukherjee.

The wholesale price index (WPI) based inflation, with 2004-05 as the base year, had eased to 8.51 percent in August, as against 9.78 percent in July 2010. Food inflation crossed 15 percent for the week ended September 4.

The headline inflation remains significantly above the trend of 5.0–5.5 percent in the 2000s and that there is a need for continued policy response to contain inflation and anchor inflationary expectation, RBI said.

We will be able to achieve the growth of 9 percent for the year 2011-12 as projected by me in my last Budget, Mukherjee said that on the occasion of concluding ceremony of Platinum Jubilee year of Bank of Maharashtra.