New Delhi: The Reserve Bank of India in its first monetary policy after the Union Budget 2020 was presented has kept the repo rate unchanged at 5.15 per cent. The monetary policy committee also decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.
“On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today (February 6, 2020) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15 per cent. Consequently, the reverse repo rate under the LAF remains unchanged at 4.90 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.40 per cent,” the sixth bi-monthly monetary policy statement said.
“Turning to more recent indicators, both production and imports of capital goods – two key pointers of investment activity – continued to contract in November/December, though at a moderate pace compared with the previous month. Revenue expenditure of the Centre (excluding interest payments and subsidies) remained robust in Q3, indicative of the countercyclical buffer to domestic demand being provided by government final consumption. As per revised estimates given in the Union Budget, growth in revenue expenditure of the Centre (excluding interest payments and subsidies) is estimated to be lower in Q4 compared with Q3,” the statement said.
Based on the Reserve Bank’s consumer confidence survey, consumer spending on non-essential items of consumption contracted from a year ago; however, overall spending is expected to rise, going forward, reflecting an increase in prices, RBI said.
RBI monetary policy committee began its three-day brainstorming meeting on Tuesday in the backdrop of Union Budget projecting a widening of fiscal deficit amid a slowing economy and hardening inflation. The committee has been tasked by the government to tame retail inflation based on Consumer Price Index (CPI) at 4 per cent (+,- 2 per cent).