RBI Governor Shaktikanta Das has said till the growth is revived, the RBI will continue to remain in an accommodative mode and therefore a conclusion on what is the minimum repo rate where the central bank will take a pause cannot be concluded at this stage and will again depend on the next deliberations of the MPC.
The next MPC meeting will take a call on the lower bound of repo rate when they deliberate on it, he said.
The Governor was responding to queries that if the RBI may reach near about 5 and 4.75 per cent, which is historically low, there is no space to go beyond that. So, by this statement, the MPC is giving this indication that for policy rate, there is no lower bound as such, as per the edited minutes of the MPC media meeting on October 4 .
"No, how much policy rate is around the lower bound - we have not said anything about it. What we want to say that we are giving some kind of forward guidance that as long as growth momentum remains as it is and till the growth is revived, the RBI will continue to remain in an accommodative mode.
"So, you cannot make a conclusion out of it on what is the minimum rate, what is the minimum repo rate where the RBI will take a pause. It is not possible to comment on that at this particular point of time. All that it says is to give clear indication that RBI will continue with the accommodative stance as long as it is necessary to revive the growth momentum," Das said.
On if the MPC are seeing the historical low as a lower bound, Das said: "It will not be possible for me to say anything about the lower bound. That will again depend on deliberations of the MPC. When the next deliberation of MPC will happen, then the decision will be taken."
The issue of lower bound of repo rate has arisen because the repo rate has now touched 5.15 per cent (lowest since March 2010) and with the RBI lending support to the government growth measures, economists and experts feel very soon in the next meeting of MPC, it may touch below 5 per cent which many feel is a lower bound rate or terminal rate.
On the issue of the side-effects of the government's measures to spur demand and private consumption impact on the fiscal deficit which faces an almost Rs 1.45 lakh crore dent in the revenue, Das said that the RBI believes government's commitments to stick to fiscal deficit and there are several options before the government to make it up through other sources.
"At this point of time, it may be noted that the government has made a statement that they will adhere to the fiscal deficit target of the current year. So, we have therefore no reason to doubt the commitment of the government to maintain the fiscal deficit number as given in the budget. And, this I would say because as you know the government government has several sources of revenue, so, whatever shortfall is expected because of the announcement of the corporate tax rate cuts, the government has option of making it up through other sources.
"But since government has come out with the statement and going by the past track record of the government, we have no reason to doubt the statement of the government and we go by the statement made by the government that they will maintain the fiscal deficit target," he said.