RBI has announced Fourth Bi-Monthly Monetary Policy Statement 2019-20: Point-to-Point Details

RBI has announced Fourth Bi-Monthly Monetary Policy Statement 2019-20 Point-to-Point Details
RBI has announced Fourth Bi-Monthly Monetary Policy Statement 2019-20: Point-to-Point Details

RBI has announced Fourth Bi-Monthly Monetary Policy Statement 2019-20: Point-to-Point Details


On the basis of an assessment of the current and evolving macroeconomic situation at its meeting, the Monetary Policy Committee (MPC) decided to:-

Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 5.15 per cent from 5.40 per cent with immediate effect.

Consequently, the reverse repo rate under the LAF stands reduced to 4.90 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 5.40 per cent.

The Cash Reserve Ratio (CRR) of scheduled banks unchanged at 4.0% of (NDTL).

According to the RBI Fourth Bi-Monthly Monetary Policy Statement 2019-20, What is The Current RBI Policy Rates:


Policy Repo Rate
5.15%
Reverse Repo Rate
4.90%
Marginal Standing Facility (MSF) Rate
5.40%
Bank Rate
5.10%
Cash Reserve Ratio (CRR)
4%
Statutory Liquidity Ratio (SLR)
18.75%

RBI Monetary Policy Tools | Monetary Policy Instruments

These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

On the domestic front, growth in gross domestic product (GDP) slumped to 5.0 per cent in Q1:2019-20, extending a sequential deceleration to the fifth consecutive quarter. Of its constituents, private final consumption expenditure (PFCE) slowed down to an 18 quarter low. Gross fixed capital formation (GFCF) improved marginally on a sequential basis but remained muted as in the preceding quarter. Government final consumption expenditure (GFCE) cushioned the overall loss of momentum to some extent.

On the supply side, gross value added (GVA) growth decelerated to 4.9 per cent in Q1:2019-20, pulled down by manufacturing growth, moderating to 0.6 per cent. Agriculture and allied activities were lifted by higher production of wheat and oilseeds during the 201819 rabi season. Growth in the services sector was stalled by construction activity.

Turning to Q2:2019-20, the initial delay in the onset of the south-west monsoon rapidly caught up from July. By September 30, 2019, the cumulative all-India rainfall surpassed the long period average (LPA) by 10 per cent. The first advance estimates of major kharif crops for 2019-20 have placed production of foodgrains 0.8 per cent lower when compared with last year’s fourth advance estimates.

Industrial activity, measured by the index of industrial production (IIP), weakened in July 2019 (y-o-y), weighed down mainly by moderation in manufacturing. In terms of uses, the production of capital goods and consumer durables contracted. Consumer non-durables, led by edible oils, and intermediate goods, mainly mild steel slabs, posted sustained expansion and have emerged as potential growth drivers. nfrastructure/construction sector activity turned around to register a growth of 2.1 per cent vis-à-vis (-)1.9 per cent in the previous month.

Retail inflation, measured by y-o-y changes in the CPI, moved in a narrow range of 3.1- 3.2 per cent between June and August. While food inflation picked up, fuel prices moved into deflation. Inflation excluding food and fuel softened in August.

Food inflation in August was elevated by a spike in the rate of increase in vegetable prices, a pick-up in pulses inflation and persistently high meat and fish inflation. On the other hand, softer increases in the prices of eggs, oils and fats, non-alcoholic beverages and prepared meals, and deflation in the prices of fruits and sugar cushioned the rise in overall food inflation.

Deflation in the fuel group deepened in August largely due to the pass-through from a sharp decline in international prices of liquefied petroleum gas (LPG). Subsidised kerosene prices, however, have been rising in a calibrated manner as oil marketing companies continued a gradual reduction in subsidies.

CPI inflation excluding food and fuel increased in July, but its roots were largely confined to prices of personal care and effects – mainly bullion prices, and transport and communication, reflecting rise in prices of petrol and diesel. By contrast, there was moderation in August, which was spread across most of the sub-groups; however, gold prices spiked further on global uncertainties.

The next meeting of the Monetary Policy Committee (MPC) is scheduled during December 3-5, 2019.

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