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Raghuram Rajan Retains RBI Repo Rates

India’s central bank kept its key repo lending rate unchanged at 6.75 percent on Tuesday, as widely expected, after consumer inflation picked up to a four-month high and emerging markets brace for a U.S. rate hike.
The Reserve Bank will use the space for further accommodation, when available, while keeping the economy anchored to the projected disinflation path that should take inflation down to 5% by March 2017, Rajan said in his statement.

Though economic output in the July-September quarter grew faster than China’s, it’s still below the government’s goal of 8.0 to 8.5 percent growth. India will however comfortably meet its target of keeping annual consumer inflation to 6 percent in January. “The policy statement was along expected lines,” A Prasanna, Economist, ICICI Securities, “We still think RBI will be on hold for the next policy also and await fiscal stance and inflation outturn to decide on further accommodation. In any case, we think that inflation has bottomed out at 5 percent and thus space for further easing is limited to 25 bps.”

India’s fiscal deficit reached 4.11 trillion rupees ($61.67 billion) during April-October or 74 percent of the full-year target, even as merchandise exports shrank 17.53 percent in October from a year ago to $21.35 billion on weak global demand. Wholesale prices dropped for a 12th straight month in October, falling an annual 3.81 percent mainly due to easing fuel prices. Annual industrial output grew at a slower-than-expected pace of 3.6 percent in September, dampened by a slower expansion in the mining sector.

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