RBI policy rate cut: The Chief Economic Advisor Arvind Subramanian has said that the decision taken by the Reserve Bank of India (RBI) Governor Urjit Patel to not change the repo rate will benefit the economy. Subramanian told ANI that, ”The decision taken by the RBI is in the broader good of the country. I respect the decision”. RBI had on Wednesday announced that both the repo rate and the reverse repo rate will remain unchanged at 6.25 percent and 6 percent respectively but it had cut SLR by as much as 50 bps.
The RBI had also projected that the inflation will remain between 2 to 3.5 percent for the first half of the 2017-18 fiscal year and will stay between 3.5 to 4.5 percent for the second half of the fiscal year. Subramanian also told ANI that inflation and inflation outlook remained benign.
The RBI in its review had also cautioned the government against farm loan waivers, as they may introduce a risk on fiscal slippages and could cause inflationary spillovers. RBI Governor Patel had said that “Farm loan waivers is a path that needs to be tread upon carefully”. The RBI Governor added that the fiscal slippages which may be caused by farm loan waivers can undo the work done on fiscal deficit in the last two years, according to the Indian Express.
RBI had also stated that the Goods and Services Tax (GST) is not expected to have any material help on overall inflation when it is implemented on July 1. Patel added that the inflation was low since November 2016 due to transitory factors, as reported by the Indian Express.