The Reserve Bank of India kept its key lending rate unchanged after its monetary policy review on Wednesday. The 6-member Monetary Policy Committee (MPC) 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. Unveiling the policy RBI Governor Urjit Patel said, the MPC decided to continue with its neutral policy stance.
He said, the committee expressed concern about the implications for the inflation outlook of possible fiscal slippage and the global financial instability iteming asset price volatility. However, MPC also expected the usual seasonal moderation in the prices of vegetables and food and the lowering of tax rates by the GST council to mitigate some of these pressures.
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 decrease in revenue due to reduction in GST rates may result in fiscal slippage.