Driving Naari Programme launched in Chandigarh
New Delhi, In line with market expectations, Reserve Bank of india on Tuesday kept the repo rate unchanged at 8%. The central bank also kept CRR, SLR unchanged. The reverse repo rate was also maintained at status quo of 7%.
However, it said it would cut the ceiling on bonds that must be held-to-maturity from the current 24 percent to 22 percent in stages starting in the bi-weekly cycle beginning in Jan. 10, 2015. It expects to complete the process by September 2015.
“For the near-term objective, the risks around the baseline path of inflation are broadly balanced, though with a slant to the downside. However, the undershooting of the objective may be temporary because of base effects. Turning to the medium-term objective (6 per cent by January 2016) the balance of risks is still to the upside, though somewhat lower than in the last policy statement,” said Raghuram Rajan.
“This continues to warrant policy preparedness to contain pressures if the risks materialise. Therefore, the future policy stance will be influenced by the Reserve Bank’s projections of inflation relative to the medium term objective (6 per cent by January 2016), while being contingent on incoming data,” Rajan explained.
According to RBI, the momentum of activity in all sectors of the economy is yet to stabilize. “Agriculture should shed the effects of recent shocks and pick up in Q4 of 2014-15. Industrial activity will await improvement in the business environment and the resumption of consumption and investment demand before gaining sustained speed. Post-monsoon revival in construction activity and the likely strengthening of momentum in business and financial services should sustain the recentsigns of expansion in the services sector,” RBI said in its statement.
“The key to a turnaround in the growth path of the economy in the second half of the year is a revival in investment activity – in greenfield as well as brownfield stalled projects – supported by fiscal consolidation, stronger export performance and sustained disinflation. With expectations of these conditions remaining broadly unchanged, the projection of growth for 2014-15 is retained at 5.5 per cent within a range of 5 to 6 per cent around this central estimate. The quarterly growth path may slow mildly in Q2 and Q3 before recovering in Q4,” the statement added.
Inflation as measured by the consumer price index in August slowed to 7.80% from 7.96% in July. Wholesale price index-based inflation also fell in August–to 3.47%, near a five-year low.
Rajan, who has raised rates thrice since last September, has been adamant that the back of inflation needs to be broken if the country has to get back to the path of sustainable, high economic growth.
(With inputs from Reuters)
