Terming as "encouraging" the upward revision of GDP growth forecast by Reserve Bank of India, Finance Minister P Chidambaram on Tuesday said hike in repo and reverse repo rates were aimed at price stability and would not have adverse impact on lending rates.
This is "a measured step" towards moderate monetary tightening, he said, adding that "with adequate liquidity available, there will not be any adverse impact on cost of credit for investment for productive activities."
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RBI kept its benchmark Bank Rate unchanged but hiked Repo Rate to 6.25 per cent and Reverse Repo Rate to 5.25 per cent to keep inflation under check.
Pointing to high global oil prices that have led to a rise in inflation not only in India but across the world, Chidambaram said: "To contain the upside risk to price stability, strong vigil is being maintained by both the government and RBI."
Enthused by the hike in GDP growth forecast by RBI from 7 to 7-7.5 per cent for 2005-06, Chidambaram said agriculture was likely to perform well and business confidence index was at the highest level in last 10 years.
"There are indications of an investment boom supported by buoyant growth in credit as well as in equity finance. It is critical to maintain this investment momentum to accelerate growth further," he told reporters.
Order books, capacity utilisation, employment, exports and profit margins are expected to improve in the current quarter compared to the previous one, he said.