6th Bimonthly credit policy – Remain invested to grow

  • 15th Feb, 2016

In line with our expectations, the RBI has kept the policy rates unchanged in its 6th Bi-monthly Monetary Policy statement of this fiscal today. The underlying tone of the policy shifted to become more balanced from the dovish December policy as perceived by the market. However, RBI reiterated its accommodative stance, while noting that further policy developments shall be guided by data and clarity on the implementation of 7th Pay Commission recommendations. RBI has retained its growth projections at 7.4% for the fiscal with a downside bias, with lower activity levels offset by declining input costs and improving prospects of rabi harvest. RBI has projected growth for FY17 at 7.6%. RBI also highlighted concerns from weak private investment, stalled investment projects, excess capacity, and sluggish external demand. RBI mentioned in the statement that the Jan 2016 CPI inflation target of 6% should be met. RBI said that the recent rise in inflation was largely owing to base effects and the ongoing seasonal decline in prices of fruits and vegetables could temper inflation in the near term. RBI expects inflation to be around 5% by end FY17. RBI highlighted the need to bring about structural reforms in the forthcoming Union Budget that could boost growth while maintaining fiscal discipline. This would create more space for monetary policy to ease further to support growth. We remain optimistic on the prospects of the Indian economy & policyholders would be well placed to remain invested.

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