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Published on 4/02/2020 11:41:50 AM | Source: Dion Global Solutions Ltd

RBI to come out with last monetary policy for FY20 on Thursday

Posted in Economy News| #RBI #Economy #GDP #Monetary Policy Committee

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Amid slowing GDP growth and rising inflation, the Reserve Bank of India (RBI) will unveil its last monetary policy for the current financial year on Thursday. The sixth bi-monthly monetary policy statement for 2019-20 would be the last one for the current financial year.

The Monetary Policy Committee (MPC) will meet during February 4-6 for the policy review, the RBI said in a release on Monday. The RBI said it will place the resolution of the MPC on its website before noon on February 6. The government has estimated India's gross domestic product (GDP) to be growing at a slower pace of 5 per cent in the current financial year on the back of various factors, domestic and global, including weakening consumption demand in the country. In December, the retail inflation also peaked to a five-year high of 7.3 per cent, mainly due to costlier vegetables, specifically onion and tomato.

The Economic Survey 2019-20 has projected the Indian economy to grow at around 6-6.5 per cent in the next financial year beginning April 2020. "With fiscal policy taking a growth-supportive role, on the back of monetary policy being ahead of the curve last year, the calibrated policy mix should bode well for growth.

"We look for the central bank to remain on an extended pause on rates (even as supply-induced shocks dissipate) but maintain an accommodative bias to ensure cost of capital remains stable and favourable," Radhika Rao, senior vice-president and economist, DBS Group Research, said. Crisil Ratings in its post-Union Budget 2020-21 comment has said, "Monetary policy has done its bit, but with moderate and slow success." It added that the RBI cut the repo rate cumulatively by 135 basis points (bps) through calendar 2019, but lending rates tarried with just nearly 50-bps decline. "Even as credit demand has fallen, risk aversion and weak sentiment have affected the willingness to supply credit, too." In its previous monetary policy review in December, the RBI had decided for a status quo, leaving the key repo -- the rate at which it lends to banks -- at 5.15 per cent.