RBI keeps policy rates unchanged
Key to turnaround growth path in second half is based on the revival of investment
By : DC Correspondent
Update: 2014-10-01 02:27 GMT
Mumbai: RBI governor Raghuram Rajan kept the policy rates unchanged on Tuesday and said the key to the turnaround growth path in the second half of the year is predicated on the revival of investment activity in both greenfield and brownfield projects, supported by fiscal consolidation, higher exports and sustained deflation.
If this happens, the growth projection for 2014-15 will be retained at 5.5 per cent, within a range of five to six per cent, he said. This is in contrast to what India Inc. has been saying about high interest rates hampering investment. Announcing his fourth bi-monthly monetary policy on Tuesday, Dr Rajan kept policy rates uncha-nged as he said he wanted to see the how the evolution of inflation pans out. CPI, he said, had eased in all major groups, including vegetables, but a persistent upside pressure on food prices contributed 60 per cent to headline inflation in August.
He said they would have to wait till the kharif crop comes in to assess the future path of food inflation. He was confident they would meet the near-term eight per cent inflation objective by January 2015 but was less upbeat about the 6 per cent medium-term objective by January 2016 as the balance of risks was still on upside. “This continues to warrant policy preparedness to contain pressures of the risks that materialise,” he said.
Going forward, the future policy stance would be contingent on incoming data and would be influenced by the RBI’s projection of inflation relative to the medium term. Most analysts felt there would be no cut in the interest rate till the second half of 2015.