Going For Stable Growth

Chairman & Managing Director

Bank of Baroda

The agenda for the Monetary & Credit Policy 2003-04 was set by the prevailing economic scenario.

While 2002-03 had been less than satisfactory for the economy in terms of growth, the coming year is expected to be much better with agriculture expected to bounce back after a poor 2002-03.

Industry and services are expected to continue with their good run. Inflation has started inching up on the back of increased fuel prices, rise in manufacturing sector index as also the low base effect.

While the current high rate of WPI of around 6.5 per cent may not sustain for long, the RBI itself sees an inflation rate in the range of 5 - 5.5 per cent by the year end.

 

Faced with the need to balance the divergent foals of boosting growth and checking the creeping inflation, the governor has continued with the soft rate bias for the present.

While the 0.25 percentage point cut in Bank Rate signals his intentions for the same, it also removes the distortion vis-a-vis the repo rate which had been cut in the past.

With distortions in the system being removed, interest rates have come to be determined by demand and supply factors. Banks hope that deregulation/cut in savings bank deposit rates will be next on the RBI agenda.

In response to the RBI