The Reserve Bank of India (RBI) kept the repo rate unchanged at 5.15 percent in its sixth bi-monthly statement of the current fiscal year as it has decided to continue with an “accommodative” policy stance.
RBI issued a statement today which is the first after the presentation of Union Budget, in which the government outlined huge packages for farming and infrastructure, but only gave a small cut in personal taxes and provided no new incentives for the beleaguered financial and housing sectors.
Consumer inflation, or the rate of increase in consumer prices, worsened to 7.35 percent in December – its highest level recorded in more than five years – primarily driven by food prices.
According to reports, India’s economy is forecast to grow 5 percent in the year ending in March – its weakest pace in 11 years. The economy has, however, recently shown signs of recovery.
As per a private survey, manufacturing activity expanded at its quickest pace in nearly eight years in January with robust growth in new orders and output.
Activity in the dominant service industry accelerated in January at the fastest pace in seven years on strong domestic demand.
According to some economists, the measures are insufficient to provide an immediate boost to the economy which is staring at its worst expansion rate recorded since the 2008-09 global financial crisis although the budget proposals are widely expected to provide some support to growth over the longer term.