India tightens monetary policy to fight rising inflation
Pallab Bhattacharya, New Delhi
India's central bank tightened monetary policy on Tuesday for a second time in two weeks to fight rising inflation, hiking the amount of cash commercial banks must keep on deposit in order to mop up cash flow in the economy.The Reserve Bank of India said it was raising the cash reserve ratio to 6 percent from 5.5 percent to take money out of the banking system and try to slow rapid credit growth that is spurring inflation. India's inflation has already reached a more than two-year high of 6.58 percent last week. "In view of the paramount need to contain inflation expectations and in the light of current liquidity conditions, it has been decided to increase the cash reserve ratio," the bank said in a statement. The move is aimed at sucking $3.17 billion from the banking system, the statement added. The cash reserve ratio is the percentage of a commercial bank's total deposits, which it must keep with the central bank. The government last week estimated economic growth at 9.2 percent for the financial year that ends on March 31, 2007, after the economy expanded by 9 percent a year earlier.
| 
