Commerce
and Industry Minister Kamal Nath today, 26 June 2008, said the Union
government will continue with measures to contain inflation and steps
already taken will help moderate prices in two months. Nath said he
expects industrial output growth of 8% to 9% in the current fiscal
year.
Inflation surged to a 13-year high of 11.05% early this
month. Early this week, RBI further tightened monetary policy to rein
in inflation. RBI on Tuesday, 24 June 2008, hiked both repo rates and
cash reserve ratio (CRR) by 50 basis points each. While the repo rate
has been hiked with immediate effect to 8.50 %, the CRR will be hiked
in two tranches, to 8.5% on 5 July 2008, and to 8.75% on 19 July 2008.
The
double-stroke anti-inflationary measures are expected to tighten the
liquidity in the system, as the CRR hike would suck out around Rs
16,000 crore. CRR is the proportion of deposits mobilised by banks and
parked with the RBI for statutory requirement. Banks do not earn any
interest on the cash reserves. Repo rate is the rate at which RBI lends money to banks.
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