AMN / MUMBAI
RESERVE BANK OF INDIA, RBI today kept interest rate unchanged as was widely expected in view of upward trend in inflation even as it cut the growth forecast to 6.7 per cent for the current fiscal.
Consequently, the repo rate, at which it lends to banks, will stand at 6 per cent. The reverse repo, at which RBI borrows from banks will continue to be at 5.75 per cent, it said at the fourth bi-monthly policy review.
The bank lowered to 6.7 per cent the economic growth projection for 2017-18 from its August forecast of 7.3 per cent in view of issues with GST implementation and lower kharif output estimates.
RBI also indicated a rise in inflation. It said the inflation is expected to rise from its current level and range between 4.2-4.6 percent in the second half of this year.
Addressing the media after the release of the fourth bi-monthly policy decision of 2017-2018, RBI Governor Urjit Patel said the Monetary Policy Committee reviewed evolving macro-economic and financial conditions and decided to keep the policy rate unchanged at 6% while maintaining a neutral policy stance.
RBI governor expressed concern about the loss of momentum of growth in the early months of 2017-18 especially the persisting weakness in manufacturing. He further informed that the MPC noted that the implementation of the GST appears to have rendered short term prospects uncertain possibly delaying the revival of investment activity.
He further added the teething problem related to the GST may get resolved relatively soon allowing growth to accelerate in the second half of 2017-2018.
He said that the CPI inflation has risen since last MPC meeting. He added that factors that impart upside risks to the trajectory are implementation of farm loan waivers and salary and allowances award of seventh pay commission by the states.
The RBI Governor Dr. Patel said the outlook of agriculture and allied activities is favourable and services sector performance has improved markedly. He said that it is has been reported that banks are turning away senior citizens and differently-abled. RBI governor instructed banks to put in place explicit mechanism to meet the needs of senior citizens and differently-abled so that they do not feel marginalized.
Deputy Governor of RBI, Viral Acharya said it is too early to assess the loss in momentum in growth adding that real time activity indicators do not yet paint a clear picture. The next meeting of the MPC is scheduled on December 5 and 6, 2017.