The Reserve Bank of India has once again acted on expected lines as it has decided to keep the key policy rates unchanged. The repo rate has been left unchanged at 6.75 per cent, while the CRR at 4 per cent. RBI says it is open to further policy accommodation based on positive data prints. It may be recalled that earlier this year on September 29, 2015 while making the announcement the Reserve Bank Governor Raghuram Rajan had cut repo rate by 50 basis points to four-year low of 6.75 per cent.
The RBI has also kept the GDP forecast unchanged at 7.4 per cent with a moderate downward bias, while saying that economy is showing signs of early recovery. The central bank has called for better supply management of food items to contain inflation arising from Rabi crop shortfall.
Consumption demand is driven by urban markets, but rural demand is still anaemic, the RBI said. RBI said it will closely watch the impact of 7th Pay Commission on inflation for future policy deliberations.
Meanwhile, the Federal Reserve is widely expected to raise US rates in December for the first time in nearly a decade. Although India has outperformed other emerging markets over the past two years, the country is not immune to Fed-related worries.
The governor has spent months improving the country’s defences against a Fed hike, building up foreign exchange reserves to near a record high of $352.37 billion, enough to cover about 10 months of imports.