RBI keeps Key Rates Unchanged with the Announcement of Monetary Policy Review
BENGALURU: After a controversial comment by BJP leader, Subramanian Swamy of wrecking the Indian Economy, RBI governor Raghuram Rajan has issued the Monetary Policy review today. RBI governor maintained that the overall policy stance remains accommodative, which means that the Central Bank is looking for room to ease or reduce rates and will do so when the opportunity presents itself. While maintaining India’s growth projection by 7.6 percent for the current fiscal year, he cautioned the rising inflationary pressures on the economy. The Reserve Bank of India has retained its 5 percent inflation target for the fiscal year ending March 2017.
In the Monetary Policy Review, the central bank has said that there are signs of corporate performance improving; available information on Q4 earnings suggests double digit growth in EBITDA levels for non-financial corporate. The survey indicates an improvement in the overall business situation, driven by a pick-up in capacity utilization and has put strong expectation of business conditions as seen in the first half of 2016-17.
The Reserve Bank has noted that public investment, especially in roads and railways, is gaining better strength and has expressed concern over the private investment in the country. The Central Bank has expressed its expectations for better demand condition as looking over strong monsoon prediction and improving presumption of employment.
The Reserve Bank has said that the inflation surprise in April makes the future trajectory of inflation somewhat uncertain. The RBI has also said there could be outflows of about $20 billion once the foreign currency non-resident (bank) deposits, which were garnered during the 2013 currency crisis, mature.
The Reserve Bank’s latest rounds of forward looking surveys indicates that Domestic conditions for growth are improving gradually, mainly driven by consumption demand, which is expected to strengthen with a normal monsoon and the implementation of the Seventh Pay Commission award. The Reserve Bank has said that it will review the implementation of the Marginal Cost Lending Rate framework by banks soon.
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