India's central bank at its fourth bi-monthly monetary policy review on Tuesday has kept key policy interest rates unchanged. Raghuram Rajan, Governor, Reserve Bank of India (RBI) has decided to keep repo and reverse repo rate at 8% and 7% respectively.
Meanwhile, cash reserve ratio and statutory liquidity ratio have also unchanged at 4% and 22% respectively. The RBI has decided to reduce the liquidity provided under the export credit refinance (ECR) facility from 32% of eligible export credit outstanding to 15% with effect from Oct 10, 2014.
Assocham believes that the 1% gap between RBI's own subjective forecast (of 6%) and model based projection (of 7%) of CPI inflation by January-2016, can be adequately bridged by appropriate Government action to quell price pressures. The short term measures undertaken over the last 2-3 months have had a salubrious impact on food inflation, despite monsoon remaining in deficit in excess of 10% along with significant spatial irregularities.
"We are confident that coordination between monetary and fiscal policy, coupled with pragmatic governance, will facilitate sustained disinflation in the economy, thereby allowing the next rate action to be a rate cut some time in Q1-2016," said Rana Kapoor, president, Assocham.