Expect moderate overall growth

Written by Gautam Vir | Updated: Aug 1 2008, 05:21am hrs
The message is clear: tackling inflation is the number one priority. A 50 basis points increase in the repo rate, now at 9% and CRR at 9%, from August 30 will have a huge impact and also signals a higher interest rate regime.

The markets are already running short of liquidity and this CRR hike is expected to constrain liquidity in the markets substantially. These hikes are a clear signal to the market both to constrain growth of credit as well as to hike lending rates, on the back of rising deposit rates.Going forward, while the current measures will subdue demand and contribute to taming inflationary pressures, we have to be alert to contradictory global pressures. Also with an all out focus on taming inflation, another rate increase towards the end of August is expected.

The author is MD & CEO, Development Credit Bank