Reserve Bank of India's decision to cut the repo rate from 8.5 per cent to 8 per cent would stimulate growth, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Tuesday.
“We expect the economy to perform better in 2012-13 than in the previous year,” he told journalists on the sidelines of a function to open a multi-skill development centre here.
The reduction signalled deceleration in growth, and softening of inflation. “The cut is aimed at spurring growth to the 9 per cent level seen before the economic slowdown.” The growth during 2011-12 was 6.9 per cent.
Mr. Ahluwalia said the lowering of the repo rate was on expected lines. The emphasis was on “making sure that the economy rebounds.” “I am glad that the RBI Governor has lowered the interest rates. I think it's a good signal and a good way to start the year [2012-13]. Many more things have to happen during the course of the year to put the economy back on high growth path.”
By lowering the repo rate, the RBI Governor was signalling that “the economy is now ready… [for] a stimulus… without any danger to the inflationary trend.” “The RBI is satisfied that inflationary pressure is no longer the principal thing to worry about. There are many other things we need to do in order to restore growth. … The RBI's action lowering the repo rate is a balanced judgment. Now, the time has come to change signals because inflation has come down.”
Inflation, he said, was always a matter of concern, and one should not be complacent about it. “I will certainly like the inflation rate to come down further.”
