RBI chants stability mantra
In a bid to maintain the growth momentum, the RBI kept the interest rates unchanged.
By PTI |
MUMBAI: Favouring stability to maintain the economy's growth momentum, the Reserve Bank of India on Tuesday kept its monetary policy stance for 2005-06 unchanged.
The current assessment of the macroeconomic outlook and the overall stance remains broadly unchanged from the annual statement made in April 2005, RBI said in its first quarterly review of the annual policy released here.
It kept the economic growth rate andinflation estimates unchanged at around seven per cent and 5-5.5 per cent respectively.
The central bank did not change the Bank Rate -- which rules at six per cent -- and reverse repo rate of five per cent. The repo rate was hiked by 0.25 per cent in April.
There are several global uncertainties but there are domestic factors that indicate a confidently growing economy in a stable environment, RBI said.
The current assessment of the macroeconomic outlook and the overall stance remains broadly unchanged from the annual statement made in April 2005, RBI said in its first quarterly review of the annual policy released here.
It kept the economic growth rate andinflation estimates unchanged at around seven per cent and 5-5.5 per cent respectively.
The central bank did not change the Bank Rate -- which rules at six per cent -- and reverse repo rate of five per cent. The repo rate was hiked by 0.25 per cent in April.
There are several global uncertainties but there are domestic factors that indicate a confidently growing economy in a stable environment, RBI said.
While the global factors are becoming increasingly significant for India, the domestic factors still dominate and point to favouring stability to maintain the growth momentum.
The overall industrial growth has maintained a healthy uptrend, though the delayed monsoon has imparted some uncertainties to the likely level of agricultural production. The non-food credit growth has been buoyant and broad-based.
On overall inflation trends, the central bank said the current level of inflation remains moderate, both at wholesale level and retail level. The inflationary outcome turned out consistent with the anticipation at the beginning of the year and underlying inflation remains contained.
However, the pass-through of oil prices is not yet complete, the apex bank added.
RBI said despite the higher credit growth, the goverment borrowing programme has been conducted smoothly. The bank deposit growth was higher and non-bank financial institutions' demand for the government remained positive.
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"The competing demand for funds between the government and the commercial sector has been balanced. This was facilitated by refocussing operations in favour of commercial sector relative to the government duly supported by appropriate liquidity management," RBI said. The money supply growth has been within the projected trajectory. The reserve money growth has been driven by expansion in the domestic assets rather than foreign assets, RBI said.
The domestic financing conditions remain supportive of growth and liquidity needs of the economy have been met by unwinding of liquidity in an orderly manner, though its overhang continues to be substantial, it said.
On the rise in the trade deficit, RBI said it enlarged due to high oil prices and improvement in the absorptive capacity of the economy.
This rise in trade deficit was partly offset by the buoyancy in net invisibles and net capital inflows that financed the current account deficit of Balance of Payments (BOP), it said.
It is important to monitor the trends in oil economy and enhanced growth in the industrial production and domestic investment activity for trade deficit and BOP.
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As per current assessment, the trade deficit was managable and the curent account deficit sustainable, RBI added. Download
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