With the Finance Minister Arun Jaitley sticking to the fiscal deficit target of 3.5% in his Budget speech, the onus was on the RBI to take advantage of the situation and cut interest rates
In line with the expectations of the markets and analysts, Reserve Bank of India (RBI), in its First Bi-monthly Policy Statement for the year 2016-17, decided to cut interest rates by 25 bps. The new Repo Rate fixed by RBI is 6.50% , with reverse repo rate being raised to 6%.
With the Finance Minister Arun Jaitley sticking to the fiscal deficit target of 3.5% in his Budget speech, the onus was on the RBI to take advantage of the situation and cut interest rates. The government, in a further bold move, had pared the small savings interest rate by up to 1.3 per cent providing cushion to the Reserve Bank for cutting the policy rate.
There was a general consensus of the rate cut, with a poll of Reuters expecting the RBI to cut the repo rate to 6.50 per cent - the lowest since January 2011. RBI had cut rates last time on September 29 to an effect of 50bps, pleasantly surprising the markets.
India's consumer inflation during February eased to 5.18%, when compared with the reading of 5.69% in January. The inflation rates for rural and urban areas for February were reported at 5.97% and 4.3% respectively, as compared to 6.48% and 4.81% during the prior month. Meanwhile, India’s current account deficit during October-December period (Q3 FY16) narrowed to 1.3%, when compared with the reading of 1.5% during the same period last financial year. On the negative side, India's industrial output during January contracted 1.5% on yoy basis. On broader front, Indian economy grew 7.3% during the third quarter of the current fiscal year, slower than the upwardly revised reading of 7.7% during the prior quarter. However, Indian government is projecting growth for FY2015-16 at 7.6%, better than the growth rate of 7.2% during the previous fiscal year.
With the Finance Minister Arun Jaitley sticking to the fiscal deficit target of 3.5% in his Budget speech, the onus was on the RBI to take advantage of the situation and cut interest rates. The government, in a further bold move, had pared the small savings interest rate by up to 1.3 per cent providing cushion to the Reserve Bank for cutting the policy rate.
There was a general consensus of the rate cut, with a poll of Reuters expecting the RBI to cut the repo rate to 6.50 per cent - the lowest since January 2011. RBI had cut rates last time on September 29 to an effect of 50bps, pleasantly surprising the markets.
India's consumer inflation during February eased to 5.18%, when compared with the reading of 5.69% in January. The inflation rates for rural and urban areas for February were reported at 5.97% and 4.3% respectively, as compared to 6.48% and 4.81% during the prior month. Meanwhile, India’s current account deficit during October-December period (Q3 FY16) narrowed to 1.3%, when compared with the reading of 1.5% during the same period last financial year. On the negative side, India's industrial output during January contracted 1.5% on yoy basis. On broader front, Indian economy grew 7.3% during the third quarter of the current fiscal year, slower than the upwardly revised reading of 7.7% during the prior quarter. However, Indian government is projecting growth for FY2015-16 at 7.6%, better than the growth rate of 7.2% during the previous fiscal year.
No comments:
Post a Comment