According to the central bank, incoming data since the first bi-monthly monetary policy review in April show a sharper-than-anticipated upsurge in inflationary pressures emanating from a number of food items (beyond seasonal effects), as well as a reversal in commodity prices, reports said.
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The RBI kept its gross domestic product (GDP) projection for 2016-17 at 7.6 percent. Since the rate-cutting cycle began in January 2015, the key policy repo rate has been cut by 150 basis points to 6.50 percent.
Expressing his views on the same, Rajan said: “Retain April policy inflation projection is focused with an upward bias”.
As expected, the Reserve Bank of India kept its benchmark interest rates on hold today. RBI Governor Rajan also mentioned about bringing the cash deficit towards the neutrality.
The RBI’s decision to remain accommodative propelled the market to an over seven-month high as the Sensex regained the 27,000-mark at close by surging more than 232 points.
“Given the uncertainties, the Reserve Bank will stay on hold, but the stance of monetary policy remains accommodative”. The federal government led by the Bharatiya Janata Party (BJP) chose to keep the former chief economist of the International Monetary Fund (IMF) at the helm of RBI to push through economic reforms. In the same month, inflation quickened more than expected as consumer prices rose 5.4 per cent from a year earlier, driven up by higher food prices.
Growth of 7.9 per cent in the March quarter cemented India’s ranking as the world’s fastest growing large economy, yet it needs even faster growth to create jobs for millions of youngsters joining the workforce.
The central bank said it would soon review implementation of marginal cost lending rate framework by banks. I request all of my fellow citizens to sign this petition and seek (Prime Minister Narendra) Modi to depute Raghuram Rajan for second term as RBI Governor.
Besides the policy issues, investors are keenly waiting to hear whether the government will offer Rajan an extension as his three-year term is due to expire in September.
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The firming of global commodity prices viz. crude oil prices and the impact of the wage increases following the implementation of the 7th pay commission could offset the moderation in food prices that could come about with the expected normal monsoons and improved supply management.
