The following are the highlights of the third quarter review of the monetary policy unveiled by the Reserve Bank of India on Tuesday:
- Cash reserve ratio lowered by 50 basis points to 5.5% from 6%
- This step will release Rs.320 billion into the system
- Reduction can be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them
- Repurchase rate, or short-term lending rate, retained at 8.5%
- Reverse repurchase rate, or short-term borrowing rate, stands at 7.5%
- Bank rate untouched at 6%
- Growth slowing due to uncertain global environment, cumulative impact of past monetary policy tightening and domestic policy uncertainties
- Projection on growth lowered to 7% from 7.6% for current fiscal
- Moderation in inflation reflects sharp deceleration in prices of seasonal food items
- Inflation in protein-based food items and non-food manufactured products still high
- Upside risks to inflation arise from global crude oil prices, rupee depreciation and slippage in fiscal deficit
- Inflation projected to moderate to 7% by March-end
{{/usCountry}}- Inflation projected to moderate to 7% by March-end
{{/usCountry}}- Intention to maintain interest rate environment that moderates inflation
- Policy also tuned to manage risk of falling growth
- Measures intended to manage liquidity to ensure it remains in moderate deficit, consistent with effective monetary transmission
- Forthcoming budget should concentrate on fiscal consolidation
- Administrative actions should induce investment for alleviating supply constraints in food, infrastructure
- Next mid-quarter review of monetary policy March 15
- Monetary policy for 2012-13 will be on April 17