Good news for borrowers, the Reserve Bank of India’s (RBI) monetary policy committee (MPC) has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points (bps) from 5.75 per cent to 5.40 per cent with immediate effect. The MPC also decided to maintain the accommodative stance of monetary policy.
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.
The Apex Bank has revised real GDP growth for 2019-20 downwards from 7.0 per cent in the June policy to 6.9 per cent, in the range of 5.8-6.6 per cent for H1:2019-20 and 7.3-7.5 per cent for H2 – with risks somewhat tilted to the downside. GDP growth for Q1:2020-21 is projected at 7.4 per cent.
The MPC further noted that inflation is currently projected to remain within the target over a 12-month ahead horizon. The path of CPI inflation is projected at 3.1 per cent for Q2:2019-20 and 3.5-3.7 per cent for H2:2019-20, with risks evenly balanced. CPI inflation for Q1:2020-21 is projected at 3.6 per cent.