As was expected widely, the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) on Friday cut the benchmark policy rate by 25 basis points to 5.15% to do its bit to revive growth momentum in the country. But what drew more attention was some of the statements made by RBI and its governor Shaktikanta Das, especially on the weak state of the economy. Here are some of the key points that were raised in the monetary policy statement as well as during the RBI governor’s media interaction after announcing the repo rate decision:
ON GROWTH
— RBI has revised India’s real GDP (gross domestic product) growth projection for 2019-20 downwards to 6.1% from 6.9% in the August policy.
— Various high-frequency indicators suggest that the domestic demand conditions have remained weak, said RBI.
— The central bank added that while recent measures announced by the government are likely to help strengthen private consumption and spur private investment activity, the continuing slowdown warrants intensified efforts to restore the growth momentum.
— Shaktikanta Das said that RBI would continue with an accommodative stance as long as it is necessary to revive growth while ensuring that inflation is kept in check.
— RBI said it has more space to cut repo rates further.
ON COOPERATIVE BANKS
— One incident should not be used to generalise the cooperative banking system, said Shaktikanta Das.
— Every such incident (PMC Bank issue) is an experience and we will have a fresh look at the regulatory framework (for cooperative banks) and if any change is needed, we will discuss it with the government, said the RBI governor.
— Every case is unique and, based on the PMC Bank case facts, we have acted as soon as it came into light, said Das.
— Shaktikanta Das added that interest of depositor is the highest priority for the central bank.
ON NBFCs
— NBFC (non-banking financial companies) sector remains under RBI’s intense and close supervision, said Shaktikanta Das.
— Will ensure that no other systematically-important large NBFCs fail in India, RBI governor said, adding that the management of such entities have been called by the central bank whenever it was required.
ON INFLATION
— RBI’s September round of inflation expectations survey indicates that households expect inflation to rise by 40 basis points over a three-month ahead horizon and 20 basis points over a one-year ahead horizon, possibly responding adaptively to the rise in food prices in recent months.
— The central bank expects vegetable prices to remain elevated in the immediate months but are likely to moderate as winter supplies enter the market.
ON FISCAL DEFICIT
— Shaktikanta Das said there is no reason to doubt the government’s ability to stick to its fiscal deficit targets.
— RBI has not received any demand for interim dividend of Rs 30,000 crore from the government, said Das.
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Source: News18