Five reasons why RBI kept repo rate unchanged at 6%
In its assessment, the RBI said that the decision of the MPC was consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index or CPI inflation of 4 per cent.
- Oct 4, 2017,
- Updated Oct 4, 2017 4:57 PM IST
The Reserve Bank of India today maintained the status quo on current repo rate by keeping it 6 per cent. In its assessment, the RBI said that the decision of the MPC was consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index or CPI inflation of 4 per cent, while supporting growth. The government and many industry leaders were expecting a rate cut to create the demands, especially after recent economic slowdown. However, the Central bank decided to keep the rate unchanged on the account of rising inflation and widening current account deficit. It its assessment, the RBI said that India's current account deficit was growing after reaching 0.7 per cent of GDP in the last financial year on the back of rise in higher imports of gold and crude value terms. There were several other economic factors that led to this decision. The monetary policy committee said that the implementation of the GST so far appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term. "This may further delay the revival of investment activity, which is already hampered by stressed balance sheets of banks and corporates," the RBI said. The committee assessment also revealed that the consumer confidence and overall business assessment of the manufacturing and services sectors surveyed by the Reserve Bank weakened in the second quarter of 2017-18. Considering above factors, the RBI revised revised down the projection of real GVA growth from 7.3 per cent to 6.7 per cent for 2017-18.
The Reserve Bank of India today maintained the status quo on current repo rate by keeping it 6 per cent. In its assessment, the RBI said that the decision of the MPC was consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index or CPI inflation of 4 per cent, while supporting growth. The government and many industry leaders were expecting a rate cut to create the demands, especially after recent economic slowdown. However, the Central bank decided to keep the rate unchanged on the account of rising inflation and widening current account deficit. It its assessment, the RBI said that India's current account deficit was growing after reaching 0.7 per cent of GDP in the last financial year on the back of rise in higher imports of gold and crude value terms. There were several other economic factors that led to this decision. The monetary policy committee said that the implementation of the GST so far appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term. "This may further delay the revival of investment activity, which is already hampered by stressed balance sheets of banks and corporates," the RBI said. The committee assessment also revealed that the consumer confidence and overall business assessment of the manufacturing and services sectors surveyed by the Reserve Bank weakened in the second quarter of 2017-18. Considering above factors, the RBI revised revised down the projection of real GVA growth from 7.3 per cent to 6.7 per cent for 2017-18.