RBI's Policy Review on 15/03/12

The Reserve Bank kept all the rates unchanged and this move was on expected lines.Normaally,the Reserve bank's review follows the annual budget of the Govt and the Bank gets to know the move of the Govt and and a full feel of the economy based on Economic survey and buget indications.The sharp cut effected by the Bank in CRR a week ahead of the review was quite unexpected and surprising as it gave the message to the market that the Reserve Bank fully recognises the liquidity constraints in the system and action is called for.However,the inflation pressures suppressed under the uncertainities of the oil price increases and containment of fiscal deficit cannot be overlooked by the Reserve Bank for effecting policy rate cuts although, the industrial growth demands a steep cut.The present position is that the Reserve Bank and the GOVT are in opposite directions and there is an inevitable need for them to come together to frame monetary and fiscal policies.Perhaps,the budget to be announced on 16th would pave way for that.