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The Reserve Bank of India (RBI) kept Repo rates unchanged but said that monetary conditions may be stiff due to inflation.
(MSF) Marginal Standing Facility bank rate to held at 6.25% and the Reverse repo to be retained at 5.75%. Reserve Bank of India (RBI) decided to realign the marginal standing facility rate with Bank rate which in turn helped to link policy rate to Liquid Adjustment Facility (LAF).
The Monetary Policy Committee (MPC) vote was 5-1 in favour of status quo. Growth value (GVA) for fiscal year 17-18 is proposed at 6.6% and growth rate for18-19 is proposed at 7.2%.
The Consumer Price Index (CPI) inflation is averaged around 6.4% and is estimated to be in the range as predicted by the Reserve Bank of India (RBI).The annual percentage change in Consumer Price Index (CPI) is used as a factor to measure inflation.
Monetary Policy Committee (MPC) stated that the inflation will be influenced by increasing international crude oil prices which have been soaring since August 2017, House Rent Allowance (HRA) impact and monsoon. Merchandise exports bounced back in November and December.
The Monetary Policy Committee (MPC) has now turned their focus towards agriculture and infrastructure sector to crease rural income and investment. Reserve Bank of India (RBI) consulted with various stakeholder and organizations to decide where bank rate should be aligned with MSF rate.
Monetary policy did not asses any importance on minimum support price (MSP) kharif crops which were mentioned in the Union budget this year. Elevated commodities prices may pull aggregate demand. Growth in global demand is expected to improve exports.Recapitalization of public sector banks may help to improve credit flows in future.
Implementation of Goods and service tax on economy seems to be stabilizing whereas rising elevated commodities prices may pull down aggregate demand. Growth in global demand is expected to improve exports here is a possibility that oil prices could also soften which is expected to brings down inflation in the future. The economy continues to be in a recovery path to see early signs of investment revival activity. The Wall Street just went through its worst intra-day crash after 10 years over a possible Fed rate spike to control inflation.