Describing the RBI's status quo policy as a calibrated approach to strike a balance between growth and inflation, Finance Minister Arun Jaitley today said the government on its part will address the problem of price rise by improving supplies. "It is a priority for the government to maintain a balance between growth and inflation ... It (RBI) has followed a calibrated approach aimed in the direction of balancing between growth and inflation," Jaitley said in a statement.
The Reserve Bank of India, in its Second Bi-Monthly Monetary Policy Statement for this financial year, kept the key interest rate unchanged at 8%. However, it cut the statutory liquidity ratio, the amount of deposits that banks need to park in government securities, by 0.5% to 22.5% to improve availability of funds. Jaitley said the government would address the problem of price increases through supply-side measures, particularly in relation to food inflation. The government, he added, is also concerned with restarting the investment cycle and moving towards higher growth and employment generation.
"Fiscal consolidation is a priority for the government," he said.
Jaitley said that by reducing the SLR, the central bank has allowed banks to lend more to the private sector since they will be required to subscribe less to government securities than earlier. Retail inflation as measured by the consumer price index accelerated to a three-month high of 8.59% in April, pushed up by a sharp spike in food prices. Inflation in the food category stood at 9.66%.