Finance Minister Pranab Mukherjee said the hike in key rates will ease inflation, besides keeping economic growth on track.

‘I expect that this policy will lead to further easing of inflation, which is already going down, and it should also keep us fully on track in terms of growth,’ Mr Mukherjee said.

The Reserve Bank of India raised repo rate by 25 basis points to 5.75 per cent and reverse repo rate by 50 basis points to 4.50 per cent. It has kept cash reserve ratio unchanged at six per cent.

He said the monetary policy announced by the RBI is another calibrated step in the right direction.

‘I am very pleased that the RBI has not only raised policy rates but also narrowed down the spread between the repo and reverse repo rates by 25 basis points,’ the Finance Minister said.

He added that a narrower spread will make for a more efficient financial system.

The Minister also endorsed the RBI’s decision of not raising the CRR. ‘With the successful 3G auctions, there is going to be a natural tightening of credit,’ he said.

Talking to reporters, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the hike will not affect the real economy.

Currently, the food inflation is hovering over 12 per cent and the overall rate of inflation is above 10 per cent.

UNI