India’s central bank holds rates, cuts growth forecast

NEW DELHI: India’s key interest rates will remain unchanged, the country’s central bank said on Thursday, citing a focus on checking inflationary pressures even as it cut the annual growth forecast for Asia’s third-largest economy to 5 per cent.
The Reserve Bank of India’s monetary policy review kept the repurchase rate it charges on loans to commercial banks at 5.15 per cent while holding the reverse repo, the rate at which it borrows from commercial banks, at 4.90 per cent.
The RBI revised its forecast for India’s gross domestic product for the financial year to 5 per cent, from an estimate of 6.1 per cent in October. India’s financial year runs from April to March.
India’s GDP slumped to 4.5 per cent in the quarter ending September, when compared to the same quarter a year earlier, the slowest pace in more than six years.
The RBI’s Monetary Policy Committee (MPC) reiterated it would maintain an “accommodative stance” after inflation breached its medium-term target of 4 per cent for the first time in October after15 months.
The unchanged interest rates came as a surprise for economists who predicted that the RBI would cut rates for the sixth time running to boost a sluggish economy.
“The MPC recognises that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture,” the RBI said in its statement.
“The MPC 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,” it said.
Opposition parties have protested against Prime Minister Narendra Modi government’s policies and handling of the economy, which they held responsible for India’s slowest growth in years.
The slowdown comes amid several months of downbeat figures, including weak consumer demand and private investment, shrinking factory output, and an export slump.
The government has exuded confidence that the economic growth will pick up soon, maintaining that the economy’s fundamentals remain robust.
Former finance minister P Chidambaram, released on bail in a graft case on Wednesday, attacked the government for lower growth that pushed millions into poverty, adding that it was “clueless” and incapable of bringing the economy out of the downturn.
He attributed the slowdown to the government’s “catastrophic mistakes,” like demonetisation, a flawed goods and services tax, “tax terrorism, regulatory overkill, protectionism and centralised control of decision making in the Prime Minister’s Office.”
Chidambaram also said that the Congress will oppose the Citizenship Amendment Bill and that he supports the protests of the students of the Jawaharlal Nehru University, the IIMC and other institutions over the proposed fee hike.
He refused to comment on his case, only saying that the order would clear the “many layers of dust” that have settled on the understanding of criminal law and the manner in
which it had been administered by the courts. — dpa/IANS