RBI Monetary Policy

BE/RBI/34/2017

RBI Skips Any Changes In Rates And Revises Growth Forecast

GRIM Outlook

The Central Bank has:

  • Kept the policy rates unchanged
  • Revised the Inflation forecast for the second half of the fiscal year and
  • Brought down the growth target severely

While keeping the repo rate at 6 per cent without any change being made, RBI also insisted the banks in holding the bonds and brought down the Statutory Liquidity ratio by 50 basis points which is now 19.5 per cent.  One basis point means 0.01 per cent.

Also RBI contemplates that there is no scope for motivation from the Government side and the Governor in other terms warned that there is fear of fiscal actions, which might dent out the macroeconomic stability.   Further the RBI statement reveals that

  • The second half of the fiscal year may see an inflation level of 4.2 per cent to 4.6 per cent which was earlier estimated as 4.0 -4.5 per cent.
  • The volatility in inflation appears to be very high with an increase in inflation over 2 percent within two months period.
  • Though pulses prices have been stable as of now, there is a fear of food prices in the coming season.
  • In addition to the increase in the crude oil prices, there is also ample increase in the consumer price index based inflation.
  • The Farm Loan waiver might end up in quality of public spending which is expected to be inflationary, let apart there is going to be increase in wages and allowances by the States which has not been accounted for.
  • The central bank hoped that various structural reforms introduced recently will result in supplementing the growth strategy which is backed by the high frequency indicators.
  • Referring to the Demand for Bank Credit by Industries, the RBI Governor opined that with good creditworthiness all sectors will look forward for an increased investment, due to an increase in the capacity utilization, which in turn should pave for Private Sector Growth.

 

Author: Admin Bankedge

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