First Bi-monthly Monetary Policy Statement, 2014-15 Press Statement by the Governor - ਆਰਬੀਆਈ - Reserve Bank of India
First Bi-monthly Monetary Policy Statement, 2014-15 Press Statement by the Governor
"Good morning and welcome to the Reserve Bank. On the basis of an assessment of the current and evolving macroeconomic situation, we have decided today to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent. We have also decided to increase the liquidity provided under 7-day and 14-day term repos from 0.5 per cent of net demand and time liabilities (NDTL) of the banking system to 0.75 per cent, and decrease the liquidity provided under overnight repos under the LAF from 0.5 per cent of bank-wise NDTL to 0.25 per cent with immediate effect. Let me turn to the rationale. Real GDP growth is projected to pick up from a little below 5 per cent in 2013-14 to a range of 5 to 6 per cent in 2014-15 albeit with downside risks to the central estimate of 5.5 per cent. Easing of domestic supply bottlenecks and progress on the implementation of stalled projects already cleared should contribute to growth, as will stronger anticipated export growth as the world economy picks up. For the year as a whole, the CAD is expected to be about 2.0 per cent of GDP. Sustained inflows, augmented by repayments by public sector oil marketing companies of their foreign currency obligations to the Reserve Bank during March, have led to an increase in reserves. Looking ahead, vegetable prices have entered their seasonal trough and further softening is unlikely. There are also risks to our central forecast of 8 per cent CPI inflation by January 2015. These include a less-than-normal monsoon due to possible el nino effects; uncertainty on the setting of minimum support prices for agricultural commodities and the setting of other administered prices, especially of fuel, fertilizer and electricity; the outlook for fiscal policy; geo-political developments and their impact on international commodity prices. There will also be a downward statistical pull on CPI inflation later this year, due to base effects from high inflation during June-November 2013. It is critical to look through any transient effects, including these base effects, which could temporarily soften or harden headline inflation during 2014. Our policy stance is firmly focused on keeping the economy on a disinflationary glide path that is intended to hit 8 per cent CPI inflation by January 2015 and 6 per cent by January 2016. At the current juncture, it is appropriate to hold the policy rate, while allowing the rate increases undertaken during September 2013 through January 2014 to work their way through the economy. Furthermore, if inflation continues along the intended glide path, further policy tightening in the near term is not anticipated at this juncture. In pursuance of the Dr. Urjit R. Patel Committee’s recommendation to de-emphasise overnight “guaranteed-access” windows for liquidity management and progressively conduct liquidity management through term repos, we have decided to further reduce access to overnight repos under the LAF while compensating fully with a commensurate expansion of the market’s access to term repos from the Reserve Bank. The primary objective is to improve the transmission of policy impulses across the interest rate spectrum. Developmental and Regulatory Policies We have set out a five-pillar framework to guide the developmental and regulatory policies of the Reserve Bank. I invite you all to go through Part B of the Policy Statement which lays out the developmental and regulatory measures, the progress made and some new initiatives that are being undertaken. Let me highlight a few.
Turning to markets
As regards foreign investors, the Reserve Bank welcomes them and will continue to work to ease entry costs while reducing risk for investors and the volatility of flows. Towards this end
Turning to inclusion and customer protection,
A number of measures to protect consumers are being envisaged. For example,
Finally, to tackle distress in the system
Finally, I hope the only thing that was surprising about monetary policy today was the lack of surprise. I am glad financial markets and analysts have started understanding what we are doing. Thank you for your attention". Alpana Killawala Press Release : 2013-2014/1927 |