The Reserve Bank of India on Wednesday announced that the repo rate remains unchanged at 6.25 per cent and the reverse repo rate stays at six per cent. The central bank also projected that inflation will remain in the 2 to 3.5 per cent range for the first half of 2017-18 and in the 3.5 to 4.5 per cent for second half. The RBI in its monetary police review also cut growth projection for current fiscal to 7.3 per cent from 7.4 per cent.
In its review, it further cautioned against rush of farm loan waivers, warning of a risk on fiscal slippages and inflationary spillovers. “Farm loan waiver is a path that needs to be tread carefully,” RBI Governor Urjit Patel said, adding that farm loan waivers can lead to fiscal slippages, and undo work on fiscal deficit done over the last two years. On GST, which will be implemented come July 1, the RBI said GST is not expected to have material impact on overall inflation. RBI Governor Urjit Patel in his address to the media said inflation was at a low since November 2016 due to transitory factors.
Patel said that new data released by CSO needs to be analysed carefully before reaching conclusions with certitude. On the recently released GDP data, Patel said it shows that the economy started slowing before demonetisation, adding that the GDP slowdown was more due to fundamental factors.