The Reserve Bank of India (RBI) had scheduled a meeting for the review of the credit policy on January 25. Macroeconomic situation along with various other short-term and long-term parameters will be considered during the meeting.

Rise in the inflation in the past few weeks and higher interest rates grounds the slowness in industrial growth. Last meeting was organized in December in which RBI has taken few strict steps for controlling inflation and being moderate economic growth.   

As per banks and dealers like Morgan Stanley India Primary Dealer Pvt. and ICICI Securities Primary Dealership Ltd., RBI need to stop its buyback in two years as inflation is increasing at higher rate.

Policy rate of central bank stood at 6.25%, which is recorded as the highest among Asia’s 10-biggest economies. Central bank has granted 1.2 trillion rupees to the lenders in the month of December whereas in January lenders borrowed 823 billion rupees. These patterns suggest that bond purchases are boosting the availability of cash.

Manoj Swain, chief executive officer at Morgan Stanley India Primary Dealer in Mumbai stresses to stop repurchases as inflation has taken the driver’s seat.

Whole sale price index rose to 8.43% in December. There was 18.3% increased in the food prices in the week ended Dec. 25 due to rise in the prices of onion. Fuel prices have also shown acceleration twice in the past one month.

At present inflation rate is shocking but it can be worst if it takes its second round, said by Vishnu Varathan, an economist at Capital Economics (Asia) Pte in Singapore.

Talking of bond performance, three-year government bond in India will yield 7.76 percent. As per indexes recorded by London-based HSBC Holdings Plc this month India’s bonds lost 0.9 percent.

Similar happens with the rupees also, rupee has lost 1.5 percent this month as compared to other currencies in Asia.