Expect continuation of tight credit policy: Narayan

Continuing with its anti-inflationary stance, the Reserve Bank of India (RBI), in its mid-quarter policy review, hiked repo and reverse repo rates by 25 basis points (bps) each.

This takes repo (rate at which it lends to banks) to 7.5% and reverse repo (rate at which it borrows) to 6.5%. Other policy rates like Cash Reserve Ratio (CRR) and Statutory Reserve Ratio (SLR) have been left untouched.

Also read RBI rate hikes: 10 times in 15 months

According to S Narayan, former finance secretary, RBI's tight monetary policy will continue for sometime because inflation is not going to come down sharply in the short to medium term.

He says that the Reserve Bank is saying two-three different things; one, it is saying the pricing power continues to be strong, as a number of analysts have pointed out, which means that the companies are able to pass prices onto the consumers. It is also saying that there is pressure on wages; it can be seen that executive wages and management wages are really going up during the course of this year.

So therefore, the Reserve Bank is saying that there are underlying inflationary pressures which are working down through the wage and price spiral, and therefore it does need to keep its options open for quite some time in the future.

The RBI is also saying that the growth