Another CRR hike expected from RBI

Sonal Varma, an economist with Lehman Brothers, said she expected the Reserve Bank of India to hike the cash reserve ratio (CRR) — the portion of deposit that banks keep with the central bank — by at least half a percentage point during the year and the government to take more fiscal and trade measures. The RBI has already increased CRR to suck out over Rs 27,000 crore liquidity from the system.
Crisil principal economist D. Joshi said, “The inflation would continue to move up in the coming weeks as there was pressure of the depreciating currency and high crude prices. The depreciating rupee is offsetting fiscal measures taken by the government.”
The government is in a fix over prioritising between growth and inflation. Amid rising prices, industrial growth has dipped to a mere 3 per cent in March. Besides the hike in CRR, the government has taken many fiscal measures such as a cut in customs duties on products such as edible oil, steel inputs and skimmed milk powder.