P Chidambaram unhappy as RBI holds back on cutting rates

Finance Minister P. Chidambaram has expressed unhappiness over the Reserve Bank of India's (RBI) decision to not cut key policy rates, saying the government would walk alone to face the challenge of growth.

In the second quarter review of monetary policy for 2012-13, RBI lowered the cash reserve ratio (CRR) by 0.25 per cent (or 25 basis points) to 4.25 per cent, but kept other policy rates unchanged.

"Growth is as much a concern as inflation. The government has to walk alone to face the challenge of growth... Sometimes it is best to speak and sometimes it is best to be silent. I think this is a time for silence," Chidambaram said, making his anger apparent on RBI's policy.

A day before the review, Chidambaram had announced a five-year road map for fiscal consolidation, setting a target of cutting the fiscal deficit to 3 per cent by 2016-17 from 5.8 per cent recorded in 2011-12.

"The government is doing its best to send a clear message that we are on the path of fiscal consolidation and it is my hope that everybody will understand the government's commitment of fiscal consolidation," Chidambaram said.

In the policy review, RBI kept the repo rate - the rate at which it lends to commercial banks - unchanged at 8 per cent. The reverse repo rate - the rate at which the apex bank borrows money from commercial banks - was also kept unchanged at 7 per cent.

with inputs from IANS