Ahead of the Reserve Bank's monetary policy review on Tuesday, bankers today said the central bank should focus more on growth as the country cannot afford economic expansion of below 5%.
"The RBI could give a signal because it does not want growth to come below 5%," HDFC Bank Managing Director Aditya Puri said.
Attributing the marginal spike in September inflation to the diesel price hike, he said: "Yes, inflation has been high, but about 30 basis points of that is due to fuel price increase, so the actual number is only about 7.5%. I am hoping for the best."
Axis Bank MD & CEO Shikha Sharma said after the recent reforms which have a bearing on fiscal consolidation, the time has come for RBI to shift its focus towards growth by effecting at least a 0.5% cut in cash reserve ratio (CRR).
"While monetary policy needs to focus both on inflation and growth, given the recent fiscal measures, I think the leaning of policy right now needs to be on growth," she said.
"We just can't afford to have growth being stopped below 5%. Therefore, I would see CRR cut by 0.5%," she added.
Oriental Bank of Commerce's CMD S L Bansal is expecting a 0.25% reduction in short-term lending or the repo rate as liquidity is comfortable now.
The Reserve Bank's second quarter monetary policy review is scheduled for October 30.
State Bank of India Chairman Pratip Chaudhuri said high interest rates are impacting employment generation and hence the need to lower rates for jobs creation.
"I think in their policy making, the RBI should also take into account the employment numbers because now so many other countries have taken. Every country takes very serious note of the employment numbers," he said.
Economic growth in the first quarter of the current fiscal had fallen to nine-year low of 5.5%. The growth in factory output in August was also not encouraging as the Index of Industrial Production (IIP) expanded by a nominal 2.7% only.
RBI in its monetary policy have been maintaining that bringing down inflation is its priority. It last cut the repo rate in its annual policy by 0.5%, a reduction after a gap of three years.
Meanwhile, costlier diesel fuelled inflation to 10-month high of 7.81% in September.
