The Reserve Bank of India has announced that the repo rate will remain unchanged at 6.25 percent. The reverse repo rate under the LAF remains unchanged consequently at 5.75 percent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 percent.
Governor Urjit Patel had announced that the central bank had decided to withdraw the incremental Cash Reserve Ratio (CRR) from December 10.
The RBI had also lowered GDP growth estimate to 7.1 percent in 2016-17 from an earlier projection of 7.6 percent in its policy review .
The monetary policy committee said in a statement, that “in October 2016, GVA growth in H2 had been projected at 7.7 percent and for the full year at 7.6 percent. Incorporating the expected loss of growth momentum in Q3 and waning effects in Q4 alongside the boost to consumption demand from higher agricultural output and the implementation of the 7th CPC award, GVA growth for 2016-17 is revised down from 7.6 percent to 7.1 percent, with evenly balanced risks”.
Urjit Patel, the RBI Governor said in the announcement, that it had already been decided to keep retail inflation at five percent in the fourth quarter of current fiscal. The statement reads, “Retail inflation measured by the headline consumer price index (CPI) had eased more than expected for the third consecutive month in October, driven down by a sharper than anticipated deflation in the prices of vegetables. Underlying this softer reading, however, was an upturn in momentum as prices rose month-on-month across the board.”
The RBI also stated that there was adequate supply of notes, asking people not to hoard new currency. The central bank claimed that it had supplied Rs 4 lakh crore in new notes. R Gandhi, deputy RBI Governor said, “Demonetisation decision was not taken in haste but after detailed deliberation as high level secrecy had to be maintained.”
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By Prakriti Neogi