RBI holds repo rate at 6%
In the first bi-monthly monetary policy review of 2018-19, the RBI's monetary policy committee (MPC) has kept repo rates unchanged at 6%, Cash reserve ratio and reverse repo rate have also been held at 4% and 5.75% respectively. The only one in the six-member MPC to vote for a rate cut was Michael Patra, who wanted a 25-basis-point drop in repo.
What is the repo rate?
Repo rate is the rate used by the Reserve Bank of India to lend money to commercial banks whenever a shortage of funds arises. The repo rate is also used to control inflation in the country: the RBI increases the rate to lower inflation.
GDP growth to go up from 6.6% to 7.4%
The RBI has maintained status quo on repo rate in its last three policy meets. Last August, it was reduced by 0.25 percentage points, taking it to a six-year low. The statutory liquidity ratio has also been retained this time at 19.5%. GDP growth is estimated to go up from 6.6% in 2017-18 to 7.4% in 2018-19, with risks evenly balanced.
Consumer inflation to range between 4.4-5.1% this year
Meanwhile, the revised CPI inflation projection for 2018-19 is 4.7-5.1% in the first half and 4.4% in the second, with risks tilted to the upside. "With the sharp moderation in food prices in February-March, the inflation trajectory in H1:2018-19 is expected to be lower than the projection in the February statement, despite a likely reversal in food prices in H1," the RBI said.
MPC retains 'neutral stance' in line with expectations
The policy review and outlook were mostly in line with expectations. The MPC has stuck to its 'neutral' stance, which can help support an early recovery in economic growth even as inflation eases.
