Finance Minister P Chidambaram says that the rate hikes by the RBI does not surprise him. He believes that the entire exercise is due to robust economic conditions and the idea is to contain inflation.
Chidambaram doesn't believe that the economy will slow down on account of high interest rates. Rather, the demand is high with good credit offtake. Productive sectors of the economy, he adds, will not be denied credit.
He thinks that the RBI has recognised short-term rates and the government agrees with the RBI's assessment. On Inflation, he says, it is likely to be contained in short term.
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The Monetary and Credit Policy 2006-2007