While keeping key rates unchanged, the RBI said it would allowing the rate increases undertaken during September 2013-January 2014 to work their way through the economy
The Reserve Bank of India (RBI), in its first bi-monthly credit policy review has kept repo, reverse repo, cash reserve ratio (CRR) and bank rate unchanged. The RBI said its policy stance will be firmly focussed on keeping the economy on a disinflationary glide path that is intended to hit 8% consumer price index (CPI) inflation by January 2015 and 6% by January 2016.
"At the current juncture, it is appropriate to hold the policy rate, while allowing the rate increases undertaken during September 2013-January 2014 to work their way through the economy. Furthermore, if inflation continues along the intended glide path, further policy tightening in the near term is not anticipated at this juncture," the central bank in its policy statement.
With no change in key policy rates, the repo rate (the rate at which the RBI lends money to banks) remains at 8%. Similarly reverse repo rate (the rate at which the RBI borrows from banks), CRR, and bank rate remains at 7%, 4.00% and 9%, respectively.
Repo Rate.......................8%
Reverse Repo Rate...........7%
CRR...............................4%
Bank Rate.......................9%
RBI said despite some positive movement in more recent data, industrial activity continues to be a drag on the economy, with retrenchment in both consumption and investment demand reflected in the contraction of output of consumer durables as well as capital goods.
"In the quarters ahead, the boost provided by robust agricultural production in 2013 may wane. Moreover, the outlook for the 2014 south-west monsoon appears uncertain. Sluggishness in industrial activity, exports and several categories of services underlines the need to revitalise productivity and competitiveness," the central bank said.
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