Policy rates unchanged in Raghuram Rajan’s last review

rbi policyThe Reserve Bank of India (RBI) has released the third bi-monthly policy statement on Tuesday. This statement was also the last by the present RBI Chief Raghuram Rajan, who is about to step down in the coming September 4. On the basis of the assessment of the current and evolving macroeconomic situations, the apex bank has decided to keep the repo rates unchanged at 6.50 per cent and the reserve repo rate to be maintained at 6 per cent. The cash reserve ratio shall also be unchanged at 4 per cent.

The inflation has climbed up to a 22 month high of 5.8 per cent in June after it touched 5 per cent earlier in March. The climbing momentum of inflation and factors like food inflation and the effect of the seventh pay commission have cautiously forced RBI to keep the rate unchanged. However, the accommodative stance of the monetary policy will prevail and the RBI will find provisions for liquidity, said Rajan. The Governor also revealed his confidence in the Indian economy relating to policy reforms.

Rajan said the passage of Goods and Services Tax (GST) Bill has pointed towards the growing consensus among political parties. The monsoons are also above average this year after a constant dip in the earlier years. The industrial production has also picked up along with service sector expanding in last month. The continuing dip in the global trade scenario will also determine how far Indian economy can cap in the immediate future. Here are the other assessments of RBI in 3rd bi-monthly policy:

  • After the second bi-monthly policy, several developments have clouded the outlook of global economy and the growth rate is slow than anticipated across the advanced economies like US, Japan.
  • The emerging markets revealed mixed activities in Q2 of 2016. China has stabilized its GDP growth driven by strong impetus, though manufacture faced slowdown. In Brazil and Russia the recession is fading away.
  • World trade is sluggish in the first half of 2016 due to several reasons like Brexit vote, increased currency volatility. On contrary domestic factors like monsoon, manufacturing and mining has been faring well.


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