BE/RBI NOTE/08/2019
- RBI in its MPC (Monetary Policy Committee) meeting cut benchmark lending rate by 0.25 percent which is now 6.25 percent.
- This was on the expectations of inflation staying within its target range.
- Also, this is a move that is likely to make the Home Loan and other Loans cheaper
- The Governor stood neutral from its old stand.
- While two Deputy Governors voted against the reduction in rate, the RBI Governor out voted them and reduced the rate to 6.25 percent, from 6.50 percent.
Results:
- The rate cut is in consonance with achieving medium term objective of maintaining inflation at the 4 percent level and supporting growth thereby.
- It was also said that the need of the hour is to strengthen private investment activity and buttress private consumption.
- RBI expects the GDP growth to be at 7.4 percent in FY 20 which is more than 7.2 percent estimated for FY 19 by CSO.
- MPC also stated that interim budget proposals for FY 20 will boost aggregate demand by rising disposable incomes. The full effect of the measures will take time to play out.
Note:
With the provision of Rs. 70,000 crore as basic income scheme for farmers, the Central Government budget deviated marginally from the fiscal consolidation path by announcing a slip in FY 19 and pegging the gap at a higher 3.4 percent for FY 20
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