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RBI governor Urjit Patel-led Monetary Policy Committee (MPC) kept the key repo rate unchanged in the first monetary policy review of 2017 and after Budget 2017.
In a surprise move, the RBI had kept the repo rate unchanged in the fifth bi-monthly monetary policy statement for 2016-17 on December 7, while it had cut the repo rate by 25 bps in the October 4 policy review in 2016, which was the first rate cut by Patel as the Governor. What is particularly notable is that the Central government’s aggregate expenditure growth is going to moderate sharply to 6-7% YoY in FY18 compared to 12-14% in the past 2-3 years. Additionally, the fiscal math presented in the Budget is quite credible, which should also be comforting for RBI. As regards growth, the economy is certainly stabilising after the demonetisation shock, but still aggregate demand remains weak with private capex particularly anemic.
In a surprise move, the RBI had kept the repo rate unchanged in the fifth bi-monthly monetary policy statement for 2016-17 on December 7, while it had cut the repo rate by 25 bps in the October 4 policy review in 2016, which was the first rate cut by Patel as the Governor. What is particularly notable is that the Central government’s aggregate expenditure growth is going to moderate sharply to 6-7% YoY in FY18 compared to 12-14% in the past 2-3 years. Additionally, the fiscal math presented in the Budget is quite credible, which should also be comforting for RBI. As regards growth, the economy is certainly stabilising after the demonetisation shock, but still aggregate demand remains weak with private capex particularly anemic.
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