India keeps interest rates stable in policy review

By agencies   |   Tuesday, 26 July 2005, 07:00 Hrs
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MUMBAI: The Reserve Bank of India has kept benchmark interest rates stable in a quarterly review of monetary policy and kept to an April forecast of seven percent growth for the year ended March 2006.

Analysts had widely expected the central bank to keep interest rates on hold to spur growth.

"The Reserve Bank's current assessment of the macroeconomic outlook remains broadly unchanged. It is apparent that there are several global uncertainties, but there are domestic factors which indicate a confidently growing economy," RBI Governor Y.V. Reddy said in a statement.

In its April review, the central bank announced a surprise 0.25 points hike in its key short-term repurchase rate to 5.0 percent on concern that high oil prices will stoke inflation in Asia's third largest economy.

However, in April, it kept the long-term bank rate, the benchmark for loans by commercial banks, at a three-decade low of 6.0 percent.

The central bank forecast for economic growth of seven percent is in line with estimates by the country's finance ministry, which has cited good annual southwest monsoon rains this summer to spur growth in the farm-dependent economy. In the year ended March 31, 2005, the economy grew 6.9 percent.

The central bank policy statement on interest rates and prospects for the economy released Tuesday is published quarterly and closely watched by the markets and borrowers who hope for steady rates to ensure continued strong growth in the country of more than one billion people.

The benchmark Mumbai stock exchange 30-share Sensitive index was up 39.70 points 0.53 percent to 7,545.07 following the release of the review.

Indian share prices closed at a record high Monday as the Sensex rose 82.35 points or 1.11 percent to close at 7,505.60.

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