Quarterly policy review: RBI keeps interest rates, CRR unchanged, focus shifts to growth

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The central bank also kept the cash reserve ratio (CRR) unchanged at 4.25 per cent.  (Reuters) The central bank also kept the cash reserve ratio (CRR) unchanged at 4.25 per cent. (Reuters)
SummaryThe central bank also kept the cash reserve ratio (CRR) unchanged at 4.25 per cent.

India has an independent regulator RBI which is not listening both to myself and finance minister but we expect them to.

" Sharma said: "We are hoping that after major decisions the government has made which has boosted investors morale and confidence, RBI will be less conservative.

" On inflation, the RBI policy review said that WPI inflation is showing some signs of moderation.

"liquidity conditions will be managed with a view to supporting growth... thereby preparing the ground for further shifting the policy stance to support growth," it said.

The RBI said that since the Second Quarter Review in October, the global economy has shown some signs of stabilisation although the situation remains fragile.

Lauding the government's recent policy initiatives, the RBI said, "further reforms should help to boost business sentiment and improve the investment climate".

In its mid-year economic analysis for 2012-13, the Finance Ministry while projecting the GDP growth for current fiscal at 5.7-5.9 per cent, had pitched for supportive monetary and fiscal policies to improve investor confidence.

The central bank has kept its policy rates on hold since April when it had last lowered the repo rate by 0.50 per cent.

As regards inflation, the RBI said, "The non-food component of the index also suggested persistent inflationary pressure".

The WPI inflation in November moderated to 7.24 per cent, but retail inflation remain elevated at 9.90 per cent.

Looking forward, it said, "The emerging patterns reinforce the likelihood of steady moderation in inflation going into 2013-14, though inflation may edge higher over the next two months."

It said the biggest risk to outlook stems from global politico-economic developments which could delay resolute policy action.

"While several emerging and developing economies are gradually returning to higher growth, weak external demand and contagion risks from advanced economies render them vulnerable to further shocks," RBI said.

On the domestic front, it said, there are some incipient signs of pick-up though growth remains significantly below its recent trend. The industrial output growth bounced back to 8.2 per cent in October, 2012, against a contraction of 5 per cent in the same month last year.

The Indian economy grew by 5.4 per cent in the first half (April-September) of the current fiscal, against 7.3 per cent in the corresponding period last year.

The RBI in its second quarter policy review had projected the GDP growth for the current fiscal at 5.8 per cent.

The mid-quarter review of the economy said, "both fiscal and monetary policy, however,

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