Finance ministry remains silent on RBI's actions

In past, FinMin openly expressed displeasure over repo rate increase or status quo maintained by then RBI governor D Subbarao

As the RBI increased the repo rate by 25 basis points in its second quarter review, the Finance Ministry chose to remain silent.

Neither the Finance Minister P Chidambaram nor the Economic Affairs Secretary Arvind Mayaram commented on the policy but officials Business Standard spoke to said that the finance ministry and the RBI were on the same page on this action.

An official did not wish to be identified said, "The increase in repo rate by 25 basis points and cutting Marginal Standing Facility (MSF) was on the expected lines."

The central bank reduced the MSF by 25 basis points from 9% to 8.75%. The repo rate has been increased from 7.5% to 7.75%.

In the past the finance ministry had openly expressed its displeasure over repo rate increase or status quo maintained by the then RBI governor D Subbarao but the official said now the priorities have changed and finance ministry also realizes that taming inflation is also important along with GDP growth.

The Wholesale Price Index (WPI) based inflation stood at a seven-month high of 6.46% in September. Even the Consumer Price Index (CPI) based inflation stood at an elevated level of 9.84% in September -- a three month high. The Gross Domestic Product (GDP) stood at a four year low of 4.4% in the quarter ended June this year.