Pranam,
[C] Highlights of RBI's First Quarter Review of Monetary Policy 2013-14
Cogencis, Tuesday, Jul 30
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MUMBAI - Following are the highlights of the Reserve Bank of India's
First Quarter Review of Monetary Policy for 2013-14 (Apr-Mar):
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MAIN HIGHLIGHTS
* Repo rate unchanged at 7.25%
* Reverse repo rate unchanged at 6.25%
* MSF, Bank Rate unchanged at 10.25%
* Cash Reserve Ration unchanged at 4%
* FY14 GDP growth projection cut to 5.5% vs 5.7%
* FY14 M3 growth projection retained at 13%
* FY14 deposit growth projection retained at 14%
* FY14 non-food credit growth projection kept at 15%
* Will endeavour to condition evolution of inflation to 5% by Mar
* To release mid-quarter policy review on Sep 18
* To detail Jul-Sep policy review on Oct 29
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GUIDANCE
* External sector influence on policy has grown in last one yr
* Last 2 yrs' stance mainly shaped by growth-inflation dynamic
* Current situation would have built reasonable case for easing
* India now caught in classic 'impossible trinity' trilemma
* Have to forfeit policy discretion for external sector issues
* Recent liquidity steps aimed at checking undue FX volatility
* Once FX mkt stabilises, liquidity steps to be rolled back
* FX stability to enable reverting to growth supportive policy
* Should use available time for structural steps on current acct
* Time available now should be used with "alacrity"
* Ready to use all tools for quick response to adverse events
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GROWTH
* Onset, spread of monsoon have been robust
* Persisting weakness in industry has heightened risks to growth
* Global growth has been tepid
* Tepid global growth impacted world trade, Indian industry
* Global spillovers impacted exports, manufacturing, services
* Govt took many policy initiatives to improve invest environment
* As govt steps work through system, current slowdown may reverse
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INFLATION
* Apr-Jun inflation trajectory mostly in line with estimates
* Some risks to inflation path have surfaced in June
* Good monsoon didn't ease food prices as much as it should have
* Vegetable prices impacted by weather-driven supply disruption
* Outlook for non-oil global commodity prices stays benign
* International crude oil prices are firming up
* Firm crude oil prices reflected in petroleum pdt price hikes
* Rupee fall expected to pass through to inflation in coming mos
* Timing of further price hikes makes inflation outlook uncertain
* Extent of further price hikes makes inflation outlook uncertain
* Objective is to contain WPI around 5% in short term
* Objective is to contain WPI around 3% in medium term
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RISK FACTPORS
* Biggest risk to macroeconomic outlook from external sector
* Not clear if mkts fully factored full impact of US bond buy cut
* Not clear if mkt will react to each signal on US bond buy cut
* India to stay vulnerable to global fincl mkt sentiment
* Large current acct gap a formidable structural risk factor
* Current acct gap raised stress on external payments situation
* Current acct gap reflects rising external indebtedness
* Most external vulnerability indicators have deteriorated
* Worsened external indicators hurt economy's resilience to shock
* External vulnerability heightens need for fiscal consolidation
* Investment climate remains weak
* Risk aversion continues to stall investment plans
* Critical to ease supply constraints in economy
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Warm Regards,
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