Mumbai, July 28 (Inditop.com) Reserve Bank of India Governor D. Subbarao will review and update the monetary policy for the current fiscal a little before noon Tuesday amid little expectation of any major change in key policy rates.
A day ahead of the review, the central bank had sharply raised its growth forecast for the country’s economy to 6.5 percent from its earlier projection of 5.7 percent, but warned that inflation could also move into higher territory.
The bank also said food prices – that are already high, particularly in the case of fruits, vegetables and lentils – were likely to move northward given the feeble progress of monsoon and the hike in minimum support price paid to farmers for their crops.
“There are indications of inflation firming up by the end of the year due to the waning base effect of last year, increase in commodity prices, delayed progress of monsoon potentially driving up food prices,” it said.
Accordingly, analysts expected status quo on key policy rates, even as industry has been seeking a cut in interest rates to reduce their cost of borrowing.
“The real challenge for the RBI is to continue the boost to aggregate demand in the near term, while withdrawing the large liquidity injected into the system to contain inflationary pressures in the medium term,” said global consultancy Goldman Sachs.
