Finance Minister Pranab Mukherjee, on Tuesday, maintained that while the Reserve Bank's decision to cut the short-term lending (repo) rate by 50 basis points to 8 per cent with immediate effect would encourage investments, the government would also do everything to help in sticking to a supportive monetary policy stance and take additional steps to contain the price rise and boost growth.
Commenting on the larger-than-expected reduction in repo rate by the RBI, which marked a beginning in policy reversal after more than two years, Mr. Mukherjee said: “The growth, which has weakened in past months, should now improve … The monetary policy announcements should help in investment revival and contribute to strengthening of business sentiments. In the coming weeks, we will take some additional steps to further reinforce focus on growth”.
Mr. Mukherjee said the moderation in the core inflation rate for four months in a row from 8.31 per cent in December 2011 to 5.18 per cent in March 2012, coupled with a sharper decline in inflation for manufactured products from 7.64 per cent to 4.87 per cent during the period facilitated the change in monetary policy stance.
However, food and primary inflation has shown some signs of hardening in March this year which, he said, was a cause for some worry. “We intend to continuously monitor the situation and take the required steps to manage the short-term supply constraints, especially in those food items which have been a cause of inflationary spikes in the past months,” he said.