It was the first monetary policy meeting under the new governor Shaktikanta Das, who took over as Governor, RBI after the abrupt exit of Urjit Patel from the office in December last year.
The Monetary Policy Committee headed by Reserve Bank of India Governor Shaktikanta Das, today announced a reduction in policy repo rate by 25 basis points from 6.5 per cent to 6.25 per cent with immediate effect.
Consequently, the reverse repo rate stands adjusted to 6.0 per cent, and the marginal standing facility rate and the Bank Rate to 6.5 per cent. The bank also projected an economic growth rate of 7.4 per cent for the next fiscal, up from 7.2 per cent estimated for the current fiscal by Central Statistics Office.
The central bank sees consumer price inflation at 2.4 in the January-March period and 3.2-3.4 per cent from April to September. The gross domestic product (GDP) growth is likely to be influenced by growth in bank credit and overall financial flows to the commercial sectors, though slowing global demand could play a dampener. Global financial markets began the year on a calmer note after a turbulent December.
Rabi sowing so far (up to February 1, 2019) has been lower than in the previous year, but the overall shortfall of 4 per cent across various crops is expected to catch up as the season comes to a close. RBI further said that in spite of soft crude oil prices and the lagged impact of the recent depreciation of the Indian rupee on net exports, slowing global demand could pose headwinds. In particular, trade tensions and associated uncertainties appear to be moderating global growth.
The six-member MPC said that the risks are evenly balanced for growth. It had stressed the need to strengthen private investment activity and buttress private consumption. This is the first policy review, post the appointment of RBI Governor Shaktikanta Das and also the first post the interim budget. The next meeting of the MPC is scheduled from April 2 to 4, 2019.