No-action policy from RBI, but growth focus clearer

The Reserve Bank of India today unveiled a no-action policy review, as against a wide expectation of a cut in banks’ cash reserve ratio. The inaction on the rate front was in keeping with the expectation.

The central bank, however, accepted there has been a decline in inflation.

It said headline inflation has been below its projections over the past two months. “The decline in core inflation has also been comforting,” the RBI said in a press release.

[caption id=“attachment_561329” align=“alignleft” width=“380”]  It said the patterns reinforced the likelihood of steady moderation in inflation going into 2013-14. Reuters[/caption]

It said the patterns reinforced the likelihood of steady moderation in inflation going into 2013-14.

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However, over the next two months the economy could see higher inflation.

“In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards,” the release said.

Reacting to the policy review, the Prime Minister’s Economic Advisory Council (PMEAC) Chairman C Rangarajan said, “What is really relevant is that there is a reiteration of intention to move towards an easing policy in the fourth quarter.”

Interestingly, the RBI, which has time and again raised concerns over the widening twin deficits, has no word about the current account deficit and fiscal deficit.

The RBI has once again managed to ward off pressures to cut policy rates from industry and the government and clearly indicates its resolve to fight the inflation.

Read the full press release here.