New Delhi: Describing the RBI's decision to raise key rates by 50 basis points as "aggressive", Planning Commission Deputy Chairman Montek Singh Ahluwalia Tuesday said it would help in controlling inflation.
"The (RBI) Governor has chosen a little more aggressive stance," he said, pointing out that many people were expecting a hike of 25 basis points in key policy rates.
"I don't think this is improper. You do need to send signals and if situation improves, he can reverse the position later. It (the decision) is bound to be effective in controlling inflation," Ahluwalia said.
Asked if the high interest rates will moderate economic expansion, Ahluwalia said that long-term growth is not affected by small variation in rates.
"Some people will worry that impact on interest rates will be too high ... it is a matter of balance. If you really want to have good environment for growth you must bring inflation under control. Long-term growth is not affected by small variations in short-term interest rates," he said.
The Reserve Bank Tuesday raised its short-term lending (repo) and borrowing (reverse repo) rates by 50 basis points to 8 percent and 7 percent respectively.
The apex bank has hiked its policy rates 11 times since March 2010, to curb inflation. Wholesale price-based inflation stood at 9.44 percent in June.
"The (RBI) Governor has chosen a little more aggressive stance," he said, pointing out that many people were expecting a hike of 25 basis points in key policy rates.
"I don't think this is improper. You do need to send signals and if situation improves, he can reverse the position later. It (the decision) is bound to be effective in controlling inflation," Ahluwalia said.
Asked if the high interest rates will moderate economic expansion, Ahluwalia said that long-term growth is not affected by small variation in rates.
"Some people will worry that impact on interest rates will be too high ... it is a matter of balance. If you really want to have good environment for growth you must bring inflation under control. Long-term growth is not affected by small variations in short-term interest rates," he said.
The Reserve Bank Tuesday raised its short-term lending (repo) and borrowing (reverse repo) rates by 50 basis points to 8 percent and 7 percent respectively.
The apex bank has hiked its policy rates 11 times since March 2010, to curb inflation. Wholesale price-based inflation stood at 9.44 percent in June.
PTI
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