India Leaves Rates on Hold


In its April 1st, 2014 meeting, Reserve Bank of India decided to leave the policy repo rate unchanged at 8 percent and decided to officially start using consumer price inflation to determine its monetary policy.

The central bank also left the cash reserve ratio unchanged at 4 percent, but decidec to reduce the amount of overnight funding to banks. 

Excerpt from the statement by Dr. Raghuram G. Rajan, Governor:

The Reserve Bank’s policy stance will be firmly focused on keeping the economy on a disinflationary glide path that is intended to hit 8 per cent CPI inflation by January 2015 and 6 per cent 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. 

Contingent upon the desired inflation outcome, real GDP growth is projected to pick up from a little below 5 per cent in 2013-14 to a range of 5 to 6 per cent in 2014-15 albeit with downside risks to the central estimate of 5.5 per cent (Chart 2). Lead indicators do not point to any sustained revival in industry and services as yet, and the outlook for the agricultural sector is contingent upon the timely arrival and spread of the monsoon. Easing of domestic supply bottlenecks and progress on the implementation of stalled projects already cleared should brighten up the growth outlook, as would stronger anticipated export growth as the world economy picks up.

India Leaves Rates on Hold


Reserve Bank of India | Joana Taborda | joana.taborda@tradingeconomics.com
4/1/2014 10:11:55 AM