Industry surprised by RBI's timing

MUMBAI: The Reserve Bank of India's (RBI) decision on Friday to raise repo and reverse repo rates signal that the central bank is now confident about the growth of the economy. Hence, the RBI is now inclined towards reining in inflation that has already gone way past the central bank's estimates, feel top corporates, bankers and fund managers.

While the move was not unexpected — given that runaway inflation has surpassed the central bank's estimates — but the timing has surprised many since the decision came a month before the scheduled RBI policy statement on April 20. And now, some expect another similar rate hike in the April meeting.

Ashish Parthasarthy, treasurer, HDFC Bank, also did not perceive any immediate impact of the RBI decision "on deposit and lending rates." Adesh Gupta, CFO, Grasim Industries, too, felt that the RBI move will not have any effect on the availability of funds in the system.

The move is expected to check the rising rate of inflation which, as of February-end, was within a striking distance of the double-digit mark. "Considering the government's focus on bringing inflation under check, the move is not completely unexpected. We knew it would happen soon," said Sanjiv Goenka, VC, RPG Enterprises.

Some, however, feel that the move could backfire on the economy since they believe that the current inflation was a supply-side phenomenon and so a hike in inflation might not serve the purpose.