RBI policy not to impact growth: Montek

The Planning Commission on Tuesday said the Reserve Bank's decision to tighten the money supply will not have any impact on growth and the economy would do better than 8 per cent expansion rate projected by the central bank. "I don't think it (RBI's monetary policy) would have any adverse affect on growth rate.

The momentum of growth revival is there in the real economy," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here.

On growth prospects, he said, "They (RBI) have done a very sensible thing. They have given a range with higher and lower end and 8 per cent is the middle point. "We, in the Planning Commission, think we would do better than that (8 per cent). But that range has accommodated everything," he said.

RBI in its monetary policy for 2010-11 raised repo, reverse repo and cash reserve ratio by 25 basis points to 5.25, 3.75 and 6 per cent respectively. It projected a growth rate of 8 per cent for the current fiscal, which is lower than Planning Commission's estimate of 8.5 per cent.

Repo and reverse repo are RBI's short-term lending and borrowing rates respectively, while CRR is the portion of deposits that banks have to park with the apex bank.

"RBI has made very reasonable and modest adjustment in CRR and repo rate. Most people had expected RBI would signal some return to neutral position from very liberal, looser monetary policy instituted a year ago. I think it is continuation of that process ... such small adjustments don't disturb the markets," he said. On inflation which is nearing double digit mark, Ahluwalia said, "Our expectations are that it would come down. I think it is appropriate that Reserve Bank calibrated short term monetary policy targets keeping in mind the possibility that otherwise inflation would get out of hand."