Committed
to keep inflation under check, RBI Governor Raghuram Rajan today left key rates
unchanged and unlocked about Rs 40,000 crore of funds by reducing the amount of
deposits banks are required to park in government securities. This is the
second time in a row that interest rates have been left unchanged amid demands
for moderation to spur growth. The repo rate, at which the Reserve Bank of
India lends to banks, has been retained at 8 per cent, while the statutory
liquidity ratio (SLR) for banks has been cut by 0.5 per cent to 22.5 per cent
with effect from June 14. The cash reserve ratio for banks has been kept
unchanged at 4 per cent. "At this juncture, it is appropriate to leave the
policy rate unchanged, and to allow the disinflationary effects of rate
increases undertaken during September 2013-January 2014 to mitigate
inflationary pressures in the economy," Rajan said while unveiling the
Second Bi-Monthly Monetary Policy Statement for 2014-15. Consumer price index
(CPI) inflation, excluding food and fuel, has moderated gradually since
September 2013 although it is still elevated, he said. Rajan, who has increased
the repo rate thrice since September, said no more tightening would be
warranted if the economy stays on a disinflationary course. He added that the
RBI may also consider a cut if the disinflation process is faster than
anticipated. Rajan reiterated the RBI's commitment to its target of getting CPI
inflation, which accelerated to 8.59 per cent in April, down to 8 per cent by
January 2015 and 6 per cent by the year after. On growth, Rajan maintained the
RBI's median estimate of GDP expansion coming in at 5.5 per cent for this
financial year.
The stance
to be adopted by the Reserve Bank was keenly awaited, especially after the
formation of a government perceived to be pro-growth at the Centre. The RBI
Governor met Finance Minister Arun Jaitley the day he took charge at North
Block and also called on Prime Minister Narendra Modi before the release of
data that showed the economy expanded 4.7 per cent in FY14 compared with 4.5
per cent in FY13. However, the persistence of inflation, especially on the food
front, was one of the factors considered detrimental for the RBI in being
accommodative in its stance. Fears of inadequate monsoon rains due to the El
Nino factor may only add to price pressures in the future. Rajan also announced
a reduction in liquidity provided under the export credit refinance facility to
32 per cent of eligible export credit outstanding from 50 per cent earlier.
However, it introduced a special term repo facility of 0.25 per cent of net
demand and time liabilities to compensate fully for the reduction in access to
liquidity under export credit refinance with immediate effect.
No comments:
Post a Comment