RBI policy as it happened: Rate kept unchanged at 6%, GVA growth estimate for FY18 cut to 6.7%

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RBI policy as it happened: Rate kept unchanged at 6%, GVA growth estimate for FY18 cut to 6.7%
  • 15:37 (IST)

    Polcy rate unchanged at 6%, GVA growth estimate for FY18 cut to 6.7%

    Following are the highlights of the fourth bi-monthly Monetary Policy Statement 2017-18, issued by Reserve Bank of India:

    1) Key policy rate kept unchanged at 6 percent.

    2) Cuts economic growth forecast to 6.7% from 7.3% for FY'18

    3) Projects inflation at 4.2-4.6 pc in the second half.

    4) GST implementation rendered prospects for the manufacturing sector uncertain in the short term, says RBI.

    5) Recent structural reforms improving business environment, transparency and increasing formalisation of the economy.


  • 15:28 (IST)

    Keeping rate unchanged a calculated decision, says Tata Capital

    “Post the RBI’s previous policy stance to reduce the repo rate by 25 basis points, retail inflation has seen an increase and reached around 3.36% in August, its highest point in the last 3 months. This coupled with recent trends in the global economy – spike in crude oil and the weakening of the rupee has forced the RBI to take a calculated decision to keep the rate unchanged. However, from an NBFC standpoint, the unchanged rate will have a minimal effect on the home loan, auto loan and white goods sector, the demand for which have remained steady and are expected to grow over the next two months as the festival season continues. We are expecting a 25-30% increase in personal loan disbursement for the current quarter compared to last year,” said Govind Sankaranarayanan, chief operating officer – retail business & housing finance, Tata Capital, in a statement.

  • at 9908.50 up 49.0 or 0.50% at 3:17 pm. ">

    15:21 (IST)

    Markets flat after status quo on interest rate

    The financial markets remained more or less unchanged after the status quo on the interest rate by the SBI.

    At 3:17 pm, the Sensex was at 31,661.79, up 164.41 points or 0.52%, and the Nifty at 9908.50 up 49.0 or 0.50% at 3:17 pm.

  • 15:11 (IST)

    Status quo on interest rate not unanimous decision; Ravindra Dholakia voted for 25 bps cut

    The Monetary Policy Committee's decision on interest rate was not unanimous.

    Chetan Ghate, Pami Dua, Michael Debabrata Patra, Viral V Acharya and Urjit R Patel were in favour of the status quo, while Ravindra H Dholakia voted for a policy rate reduction of at least 25 basis points.

  • 15:04 (IST)

    Growth slowdown to 5.7% giving rise to a lively debate, says deputy governor

    Loss of growth has given rise to a lively debate, said RBI deputy governor Viral Acharya.

    He seems to be alluding to the recent war of articles between supporters of the government and those against.

    Yashwant Sinha, former finance minister and senior BJP leader, recenlty wrote an article in The Indian Express accusing finance minister Arun Jaitley of mismanaging the economy. 

    This was followed by many experts analysing the reasons for the growth slowdown to 5.7 percent in April-June.

  • 14:57 (IST)

    From kharif uncertainty to crude prices, why is inflation target raised

    The central bank has listed out the reasons for the raising the inflation forecast:

    "First, the assessment of food prices going forward is largely favourable, though the first advance estimates of kharif production pose some uncertainty. Early indicators show that prices of pulses which had declined significantly to undershoot trend levels in recent months, have now begun to stabilise. Second, some price revisions pending the goods and services tax (GST) implementation have been taking place. Third, there has been a broad-based increase in CPI inflation excluding food and fuel. Finally, international crude prices, which had started rising from early July, have firmed up further in September," the RBI said in the statement.

  • 14:52 (IST)

    For common man, a rough ride ahead; inflation seen up, growth seen down

    The common man will have to tighten his seatbelt for a rough ride ahead. At least that is what the RBI statement is showing.

    The central bank cut the GVA growth projection for the current year to 6.7 percent from 7.3 percent earlier. 

    It also raised the inflation forecast to 4.2-4.6 percent for the second half of the year.

    "...Inflation is expected to rise from its current level and range between 4.2-4.6 per cent in the second half of this year, including the house rent allowance by the Centre," the RBI said.

  • 14:43 (IST)

    Central bank paints a bleak picture on growth scenario, takes GST impact into account

    The RBI lists out the reasons for the growth proejection cut.

    "...The loss of momentum in Q1 of 2017-18 and the first advance estimates of kharif foodgrains production are early setbacks that impart a downside to the outlook. The implementation of the GST so far also appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term. This may further delay the revival of investment activity, which is already hampered by stressed balance sheets of banks and corporates. Consumer confidence and overall business assessment of the manufacturing and services sectors surveyed by the Reserve Bank weakened in Q2 of 2017-18; on the positive side, firms expect a significant improvement in business sentiment in Q3. Taking into account the above factors, the projection of real GVA growth for 2017-18 has been revised down to 6.7 per cent from the August 2017 projection of 7.3 per cent, with risks evenly balance," the RBI statement says.

  • 14:34 (IST)

    Rate kept unchanged; growth estimate cut to 6.7%

    The RBI kept the policy rate steady at 6 percent but the GDP growth projection sharply to 6.7 percent. 

    Earlier the projection was the economy will growth at a 7.3 percent.

    With the growth rate cut and status quo on interest rate, the pressure from the government officials on the central bank is only likely to heighten.

  • 14:30 (IST)

    Rate cut on not, the GDP growth projection is likely to be cut

    The pressure on the central bank to cut rate has heightened ever since former finance minister and senior BJP leader Yashwant Sinha wrote in an article that the economy may not revive before 2019.

    “...The committee is under pressure to ease rates in midst of slowing growth,” said Radhi Rao of DBS in a note.

    “Elsewhere, the growth outlook has deteriorated since the August review, with Jun quarter GDP down to a three-year low. This will necessitate a downward revision in the central bank’s gross value added (GVA) projection at 7.3 percent,” Rao said.

  • 14:24 (IST)

    Watch out for Urjit Patel's comments on bank NPAs, recapitalisation

    The RBI's policy statement is not going to be all about the interest rate and GDP growth estiamte. One should keep a close watch what the governor has to say about the vexed issue of banking sector NPAs.

    "While Urjit Patel's comments on rate guidance is key, it is also critical to to watch out for the governor's comments on bank NPA issue. Banks, particularly state-run banks are in the middle of a bad-loan clean-up exercise. More than monetary policy cues, sticky assets on bank balance sheets is one of the major hurdles before lenders to resume lending to productive sectors. Re-capitalisation of state-run banks too is another major concern. How does the central bank assess the current NPA situation is critical at this point," says Dinesh Unnikrishan.

  • 14:19 (IST)

    Markets do not expect a rate cut, do not mind the uptick 

    Have markets priced in a rate cut?

    Not really, is what panelists on CNBC-TV18 feel. "The market is going into the policy pretty light. Investors do not expect a rate cut," one of the panelists said.

    "I am sorry to be boring. As an economist, it is 'no cut'. It's a status quo," said Shubhada Rao, chief economist, YES Bank told CNBC-TV18.

  • 14:12 (IST)

    Market off highs as investors turn jittery ahead of rate decision announcement

    The financial markets have turned jittery ahead of the RBI's monetary polciy statement and stock markets gave gains partially.

    At 2 pm, the Sensex was at 31,669.18, up 171.80 points or 0.55 percent. The index had hit a high of 31,724.19, up 226.81, earlier.

    The NSE Nifty, meanwhile, was at 9,909.25, up 49.75 or 0.50 percent..

    The ​BSE Bankex was at 27,143.77, up 61.77 points or 0.23 percent


    The rupee was at 65.34 against the dollar, up by 19 paise or 0.25 percent.

  • this article . ">

    13:59 (IST)

    Why we may see a surprise rate cut today by Urjit Patel?

    Will the RBI cut policy rate? This is the question on top of everybody's mind, especially after the GDP growth slowed down to 5.7 percent in April-June quarter.

    Firstpost's Dinesh Unnikrishnan is of the view that the RBI may have to cut the repo rate since it doesn't have many options left in a declining growth scenario.

    "...The panacea for the current phase of economic slowdown isn’t monetary policy, but fiscal reforms to address structural bottlenecks in the economy. Most importantly, the Narendra Modi government will have to work urgently to get private investments back in the economy and go aggressive on the disinvestment drive. Banking sector problems should top the priority list. A rate cut can hardly unleash the animal spirits in the economy. Nevertheless, one shouldn’t be surprised if Patel and team announce a rate cut later in the day," he argues in this article.

Will the Reserve Bank of India hold the policy rate or cut it on Wednesday? While there is a section of experts who think the central bank will have to cut the rate to spur growth most of the polls of the economists have found it unlikely.

The Reserve Bank of India will hold policy steady on Wednesday, and well past next year, amid weak economic growth and signs inflation may soon overshoot its target, a Reuters poll found.

Indian economy started losing momentum after the government's shock demonetisation of the 86 percent of currency in circulation late last year. The move has hurt demand and the slowdown was compounded by the implementation of goods and services tax.

In August, despite a neutral policy bias, the RBI cut the key policy rate after lowering its economic growth forecast in June to 7.3 percent from 7.4 percent for the current fiscal year.

Representational image. Reuters.

Representational image. Reuters.

The latest poll of 60 economists by Reuters showed although the RBI will hold its key repo rate at a seven-year low of 6 percent on Wednesday, it will downgrade its growth forecast again following disruptions caused by the new tax.

Introduced on 1 July, the GST caused confusion over product pricing and pushed private sector activity into contraction.

Economic growth slowed to a three-year low last quarter, prompting some economists to lower their outlook.

“RBI has already been highlighting downside risks to growth, and that bias should now crystallize in the updated forecasts,” said Abhishek Upadhyay, economist at ICICI Securities PD.

However, lacklustre growth and inflation hovering below the RBI’s 4 percent medium-term target - annual retail inflation was 3.36 percent in August - would not be enough to drive the RBI into action, economists said.

Nearly two-thirds of forecasters who answered an extra question said there was a chance consumer inflation would overshoot the RBI’s medium-term target this fiscal year and medians suggest the Bank would hold policy until at least April 2019, the end of the forecast horizon.

The reverse repo rate is expected to be left at 5.75 percent across the same period.

However, not all economists are convinced the RBI will keep policy rates unchanged.

Credit Agricole CIB, Geojit Financial Services and Trust Capital predict a 25 basis point trim in the repo rate next week. Over a quarter of economists polled expect a cut by year-end.

“Growth is below the central bank’s expectations and they will react to that by their easing policy stance as strong annual growth is not achievable after what happened in the first quarter of this fiscal year,” said Darius Kowalczyk, senior economist at Credit Agricole CIB.

“So in order to stimulate aggregate demand, they will lower nominal rates and the time to do this is running out as inflation is rebounding.”

(With inputs from Reuters)

Updated Date: Oct 04, 2017 15:38 PM

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