Rajan keeps inflation on top ...with subtle pro-business tilt

His uncompromising stand against inflation was clearly repeated by keeping unchanged the key policy repo rate at 8 per cent and cash reserve ratio (CRR) at 4 per cent. But he reduced the statutory liquidity ratio (SLR), the mandatory portion of deposits that banks must park in government bonds, by 50 basis points (bps) to 22.5 per cent, a measure which will unlock Rs 40,000 crore funds into the financial system.

Rajan also complemented this step with some well-worded statements to send an unambiguous message to captains of industry - that his by now well-known anti-inflationary commitment does not mean that he is anti-private business. ‘If the economy stays on course, further policy tightening will not be warranted. On the other hand, if disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance,’ he said in a master message hinting that he is not completely closed to the idea of an interest rate cut in future. 

And Rajan pointed out, ‘The decisive election result, together with improved sentiment should, however, create a conducive environment for comprehensive policy actions and a revival in aggregate demand as well as a gradual recovery of growth during the course of the year.’

A pointer to his adjustment to the pro-private corporate sector Modi Govt?