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Reserve Bank of India keeps repo rate unchanged at 6%

7  Dec.  2017

The Reserve Bank of India kept its key lending rate unchanged after its monetary policy review, on wednesday.   The 6-member Monetary Policy Committee headed by Reserve Bank of India Governor Urjit Patel kept the repo rate, the rate at which the RBI lends, short-term, to banks, unchanged at 6 per cent.  The reverse repo rate was kept steady at 5.75 per cent.
The Reserve Bank said the reason for the decision was achieving the medium-term target for consumer price index inflation of 4 per cent, while supporting growth.
Expecting the price situation to harden, the RBI raised its inflation estimate to 4.3 to 4.7 per cent, from the earlier projection of 4.2 to 4.6 per cent, for the second half of the current fiscal.
The MPC decided to continue with its neutral policy stance. The apex bank retained its GDP growth forecast of 6.7 per cent for 2017-18.
The Reserve Bank said the recent rise in global crude oil prices may sustain. And it said the implementation of farm loan waivers by some states, partial rollback of excise duty and VAT in the case of petroleum products, and a decrease in revenue due to a reduction in GST rates may result in fiscal slippage.
Finance Ministry has said, the Monetary Policy Committee (MPC) in its fifth bi-monthly policy statement has recognized that inflation remains firmly under control.
Taking note of the MPC statement, the Ministry said that it has retained its inflation projection for the second half of the financial year 2018 while assessing that the risks to this projection are evenly balanced.
The Ministry said, due to this reason, it has maintained a neutral policy stance.
The MPC has also retained its annual GVA forecast for the financial year 2018 of 6.7 per cent recognizing several significant developments and emphasizing the Government’s reform efforts such as GST, Bank Recapitalization Package and improving Ease of Doing Business Ranking.