The Reserve Bank of India (RBI) kept its key interest rate unchanged at 6 per cent for the fourth time in succession at its final bi-monthly monetary policy review of the fiscal, citing concerns about the inflationary push by rising global crude oil prices. The author looks at the rationale behind the RBI's decision to maintain a neutral stance in its monetary policy review.
There are three main takeaways from the credit policy that was presented today. First is that the RBI is broadly in consonance with the Economic Survey with regards to growth. While GVA growth for FY18 has been put at 6.6%, it would broadly amount to around 6.7-6.8% growth in GDP for this year. Also heartening is the fact that its projection for FY19 at 7.2% would also mean GDP growth in the region of just less than 7.5%. At any rate, this would be an improvement for the economy. More importantly, the RBI has pointed out that the recap of banks will help in fostering investment as banks would be better equipped to lend now.