In the recent report, the Reserve Bank of India has kept the repo interest rate unchanged at 6.50% as well as the Cash Reserve Ratio is also unchanged at 4%.
The Governor of RBI, Raghuram Rajan said the rising crude prices and also the implementation of the 7th pay commission has posed a risk to inflation. As a result of which, the repo rate and the CRR have been kept unchanged. It will also review implementation of the marginal cost lending framework by banks. The Central bank has retained the growth projection at 7.6% for the year 2016-17, saying it will be profitable and there will also be growth in consumption.
According to RBI, the monsoons are very critical for the farms. RBI Governor Rajan also mentioned about bringing the cash deficit towards the neutrality. After two successive years of drought, the world’s biggest economy is expected to benefit from good rains forecast this year. Raghuram Rajan said, “Given the uncertainties, the Reserve Bank will stay on hold, but the stance of monetary policy remains accommodative. The Reserve Bank will monitor macroeconomic and financial developments for any further scope for policy actions.” In March quarter, the growth by 7.9% has made India world’s fastest growing economy. But that is not enough, it needs to grow more so that it is able to create jobs for millions of the people.
This statement was a part of Rajan’s second bi-monthly monetary policy for the year 2016-17. It is assumed that the decision taken by him has something to do with the rise in global crude prices and also the inflation. Because of the delayed monsoons, the Central Bank seems to have maintained the current rate and does not believe in changing that.
In the month of April, the retail inflation rose by almost 5.39%, whereas in the recent months, a downward trend was seen. The broader NSE Nifty rose by 0.3%. As of now, RBI is trying hard to meet the inflation targets of 5% which is due on March 2017.
Besides all this, the investors also want to know whether Rajan will continue as his three year term will expire in the month of September.