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| Even though this move may not enthuse the market, it might have been warranted by the current liquidity situation. |
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| Further, with growth trends in the rest of the world moving up, the easing cycle for monetary policy in the developed financial markets may have ended. |
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| This provides little reason for India to signal any further downward movement in the interest rates. |
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| Moreover, by keeping the rates unchanged, the RBI may have implicitly acknowledged that the current term structure of interest rates reveals a flattening of the yield curve. |
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| For instance, the current spread between a short term and a long term paper (10-year) is around 50 basis points. |
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| To that extent, the possibility of a decline in interest rates from the current levels may not come about and hence the bank rate and the CRR cut may not have any operational significance. |
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| Meanwhile, even though the upward revision in gross domestic product growth for 2003-04 by the RBI appears reasonable, the projection of a benign inflation rate by the bank clearly emphasises that growth in the financial year 2004 will be primarily driven by the agricultural sector. |
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| Also, if the inflation stays within the projected 4-4.5 per cent band, the higher GDP growth in fiscal 2004 may be a statistical artifact as it would have come over a lower base in fiscal 2003 and 2002. |
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| Against this background, the monetary and credit policy continues to target M3 growth at 14 per cent, consistent with a revised inflation target of 4.0-4.5 percent as against the earlier level of 5-5.5 per cent and a revised real GDP growth of 6.5-7.0 per cent as compared to the earlier level of 6 per cent. |
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| The RBI is also optimistic on being able to achieve the targeted resource flow of 15-15.5 per cent to the commercial sector. |
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