Reserve Bank of India Bi-monthly Policy 2019-20

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Policy Decisions
1. Reserve Bank of India has reduced repo rate by 25 basis point to 6.00% from 6.25%. This will reduce the cost of borrowing by the banks from the Reserve Bank of India.

2. Consequently, reverse repo rate has been reduced by 25 basis to 5.75% at what rate Banks shall park their excess funds with Reserve Bank of India for short term

3. Marginal Standing Facility rate reduced to 6.25% at what rate Banks borrow from Reserve Bank of India in a situation when there is a shortfall in CRR requirement.

4. Bank rate has been reduced to 6.25% at what acts base rate for deciding the penal interest rate on banks when there is a shortfall in reserve requirements

Assessment
1. Global economic growth slowed down. 

2. Crude oil prices have risen on production cuts by OPEC and Russia as well as disruption in supplies due to US sanctions on exports from Venezuela

3. Financial markets continued to be driven by monetary policy stances of key central banks and movements in crude oil prices.

4. Central Statistics Office (CSO) in February 2019 revised India’s real gross domestic product (GDP) growth downwards to 7.0 percent from 7.2 percent

5. Retail inflation, measured by y-o-y change in the CPI, rose to 2.6 percent in February after four months of continuous decline. The uptick in inflation was driven by an increase in prices of items excluding food and fuel and weaker momentum of deflation in the food group.

6. Export growth remained weak in January and February 2019 mainly due to exports of petroleum products decelerating in response to a fall in international crude oil prices.

Outlook
1. CPI inflation is revised downwards to 2.4 percent in Q4:2018-19, 2.9-3.0 percent in H1:2019-20 and 3.5-3.8 percent in H2:2019-20

2. GDP growth for 2019-20 is projected at 7.2 percent – in the range of 6.8-7.1 percent in H1:2019-20 and 7.3-7.4 percent in H2

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