The decision of the Reserve Bank of India (RBI) to hold rates at this point of time has demonstrated its restraint and foresight, said the Confederation of Indian Industry (CII) in a statement on Wednesday.
"While being fully cognizant of the imperatives of anchoring inflationary expectations, CII is of the view that in the coming months, owing to a good agricultural performance, the prices of food items would moderate. With the rupee having stabilized, the fuel prices would also not see any sudden increase. To some extent that obviates the need for further monetary tightening. Therefore, the RBI has demonstrated restraint and foresight to strike the right balance between inflation and growth," the statement said.
It commended RBI Governor Raghuram Rajan for the decision, which it said has been counter to market expectations.
Array
CII maintained that the current spike in inflation is a supply side phenomenon and therefore, a tight monetary policy would hurt growth while proving unequal to the task of tackling inflation.
Nevertheless, inflation is a problem which cannot be ignored and therefore, CII once again urges that the government implement measures like taking perishables out of the APMC Act, strengthen agricultural supply chains, take concrete actions aimed at increasing productivity, etc.