Our Bureau Mumbai, Dec 2: (Source: The Hindu Businessline)
The RBI has decided to hold the rates. The repo rate remains unchanged at 8 per cent. There are no changes in CRR either which remains at 4 per cent of deposits.
BSE Sensex was down 69.5 points or 0.24 per cent at 28,490.04. The RBI has said it will continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL (net demand and time liabilities) at the repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and continue with daily one-day term repos and reverse repos to smooth liquidity.
RBI Governor Raghuram Rajan said change in monetary policy stance at the current juncture was premature.
Hints at rate cut in 2014: The RBI today hinted at lowering policy rate early next year if current trend in fiscal developments and disinflationary pressure continue.
The central bank reasoned that administered price corrections, as and when they are effected, weaker-than-anticipated agricultural production, and a possible rise in energy prices on the back of geo-political risks could alter the currently benign inflation outlook significantly.
The RBI has stood pat on the policy rate since January, when it increased the repo rate by 25 basis points to 8 per cent.
Growth target: RBI has kept the growth target for the current fiscal unchanged at 5.5 per cent. The RBI Governor has been under considerable pressure from industry bodies besides the odd ministerial pronouncement suggesting that he cut rates and give a boost to growth.
The slight fall in the gross domestic product (GDP) numbers for the last quarter which printed at 5.3% compared to 5.7% in the preceding quarter may have also added some heft to their pleas.
For once, the macro-economic indicators that the RBI usually quotes in support of its stance to hold rates firm are all in a favourable territory. Consumer price inflation (CPI) has been trending lower to 5.52% in october down from almost 11 per cent at the beginning of 2014.
Oil prices have fallen precipitously to $ 67.53 a barrel from levels of $110 a barrel a year ago. This was also the level that has been assumed while framing the Budget earlier this year - and hence the gains on fiscal deficit and current account deficit can be inferred.
Whether this favourable set of circumstances will sustain for the next year is still in the realm of guesses and this could be a factor that may hold the Governor's hand.
The RBI Governor has been keen to win the inflation battle and bring down inflationary expectations in the country. (Source: The Hindu Businessline)