RBI Monetary policy.

RBI lowered the bank rate by a margin of 25 base points after 3rd Bi monthly Monetary Policy Committee meeting on 2nd August, 2017. Out of total 6 Monetary Policy Committee {MPC} members, 5 voted for the rate cut. Given the way in which inflation rate has been at the historic low. Many global factors were taken into consideration before doing this.

RBI has made a mandate of maintaining the inflation rate in range of 4% {+
2% or  -2%} with insisting in on maintaining good  growth level in the economy . There had been many assessments which were done before taking this step.

Prominent economies like US and Euro zone have shown better growth figures. In these economies unemployment has been declining, inflation has been declining and the private consumption has been rising. There had been some concerns shared about the situation of Chinese economy slowness, but that also seems to be regaining its growth trajectory.

Better consumer demand has actually resulted into expanded trade volumes globally and thus causing enhancement in export and import figures in prominent economies.

Also was an interesting surge seen in US equities markets, as well as financial markets in Asian economies, while some slowness was noticed in European economies due to factors like Brexit and possible aftermath of British exit from union.

Indian economy is largely dependent upon the South eastern monsoons and a normal monsoon enhances the well being of agriculture sector. It has been pretty good so far this year. Inflation rate had been declining and was gradually registered in lower figures. India which imports crude oil heavily from outside also benefitted from decline in the international oil and crude prices.

 

Overall assessment by RBI officials indicated that inflation will be on lower side for the second half of the year also. Many factors like new regulation acts in real estate {RERA, Real estate regulation Act,}, manufacturing activities, and impact of loan waivers to farmers were taken into consideration.

MPC observed that there needs to be enhancement in private expenditure and investment, betterment of infrastructure and easing of regulation is necessary for speedy conduct of projects. The concerns about recapitalization of PSUs have been widely discussed.

Next meet of MPC will be held in October, 2017.

 

Harsh Vardhan Pathak.

 

Attached is the RBI monetary policy press release link.

 

https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=41256

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