RBI keeps repo rate unchanged at 6.75 pc

Shiv Kumar

Tribune News Service

Mumbai, December 1

The Reserve Bank of India on Tuesday left key rates unchanged. While the benchmark repo rate has been left unchanged at 6.75 per cent, CRR and SLR rates were also unchanged at 4 per cent and 21.5 per cent, respectively.

The central bank, which has already cut the repo rate by 125 basis points since January 2015, will, however, continue to keep an eye on inflation.

"We will use the space for further accommodation, while keeping an eye on inflation," RBI Governor Raghuram Rajan said in a statement.

In its commentary on the economy, the RBI noted that it was keeping projections of economic growth unchanged at 7.4 per cent for FY16. However, it warned of growing consumer price inflation and suggested that the central and state governments improve supply side management.

"The early indications of rabi sowing together with low-reservoir levels suggest that astute supply management by the central government, including close coordination with state governments, is
necessary to minimise any shortfall in the rabi crop," the RBI said.

The central bank noted that the economy was showing signs of growth. "On the domestic front, provisional estimates of gross-value added (GVA) at basic prices for Q2 of 2015-16 rose on the back of acceleration in industrial activity. Other indicators suggest the economy is in the early stages of a recovery, though with some areas of continued weakness," the RBI said.

Regarding India's external trade, the RBI said, exports contracted for the eleventh month in a row in October, indicating continuing weakness in global trade.

"Excluding petroleum products (PoL), however, the decline in exports was more moderate and early signs of a turnaround are visible in respect of readymade garments, drugs and pharmaceuticals and electronics," it added.

The central bank went on to say that it was focusing on the banks to pass on the rate cuts announced earlier this year. The RBI would move on rates during the off-cycle period. However, during
normal times, the bank would stick to policy dates for acting on rates.

In future, the RBI would follow developments on commodity prices, especially food and oil. It would also look into the implementation of the Pay Commission's proposals, and its effect on wages and rents,
ahead of policy action in future.

The next policy review will take place on February 2, 2016, the central bank said.