Monetary Policy-OCTOBER 2017

The monetary policy committee led by, Reserve Bank of India(RBI) Governor Urjit Patel annouced on today the key interest rate- Repo Rate will remain unchanged at 6%. The move came despite a sharp slowdown in economic growth. The central bank had in August projected gross value added (GVA) growth of 7.3 per cent for 2017-18.

Five members of the RBI’s monetary policy committee voted today to keep rates unchanged, with one voting for at least a 25 bps cut. The RBI also kept the reverse repo rate unchanged at 5.75 per cent. The monetary policy committee also noted the short-term impact of GST on the economy. “The implementation of the GST so far also appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term. This may further delay the revival of investment activity, which is already hampered by stressed balance sheets of banks and corporates,” the RBI’s policy statement said.

 

GVA is a measurement of economic growth which strips away the effects of taxes and subsidies. Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.