Home / Knowledge / News / Textiles / Reserve Bank of India's Mid-Quarter Monetary Policy Review

Reserve Bank of India's Mid-Quarter Monetary Policy Review

15
Mar '12
Reserve Bank of India has announced Mid-Quarter Monetary Policy Review.

Monetary and Liquidity Measures

1. On the basis of the current macroeconomic assessment, it has been decided to:

• keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.75 per cent of their net demand and time liabilities; and

• keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.5 per cent.

Consequently, the reverse repo rate under the LAF will remain unchanged at 7.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.5 per cent.

Introduction

2. The Reserve Bank reduced the CRR by 75 basis points from 5.5 per cent to 4.75 per cent effective March 10, 2012. This measure was necessitated ahead of this scheduled Mid-Quarter Review to address the persistent structural liquidity deficit beyond the Reserve Bank's comfort level, which would have further worsened during the week of March 12-16 due to advance tax outflows.

Global Economy

3. Since the Reserve Bank's Third Quarter Review (TQR) of January 24, 2012, there has been modest improvement in the global macroeconomic situation. The recent macroeconomic data for the US economy show some positive signs. In particular, labour market conditions have improved. However, the US Fed expects that economic conditions warrant exceptionally low levels for the federal funds rate at least through late 2014.

4. The immediate financial market pressures in the euro area have been alleviated to some extent by the European Central Bank (ECB) injecting liquidity of more than one trillion euro through the two long-term refinancing operations. Growth in the euro area, however, turned negative in Q4. The emerging and developing economies (EDEs) are showing signs of growth slowdown. As a result, the global growth for 2012 and 2013 is expected to be lower than earlier anticipated.

5. Inflation pressures in both advanced economies and EDEs moderated towards the end of 2011 on account of subdued domestic demand and correction in non-fuel commodity prices. Global crude prices, however, have spiked suddenly reflecting both geo-political concerns and abundant global liquidity, accentuating the risks to growth and inflation.

Click here to read more details:

Outlook

While the recovery in the US has been progressing, economic activity in the euro area has contracted. Although abundant liquidity injection by the ECB has mitigated the immediate pressures in financial markets, a credible solution to the sovereign debt problem is yet to emerge. Sluggish global economic activity, uncertainty in the euro area and rising crude oil prices will hamper growth prospects of EDEs.

On the domestic front, while most indicators suggest that the economy is slowing down, the performance in Q4 of 2011-12 is expected to be better than that in Q3. Inflation hasbroadly evolved along the projected trajectory so far. However, upside risks to inflation have increased from the recent surge in crude oil prices, fiscal slippage and rupee depreciation. Besides, there continues to be significant suppressed inflation in fuel, fertilizer and power as administered prices do not fully reflect the costs of production.

Guidance

Recent growth-inflation dynamics have prompted the Reserve Bank to indicate that no further tightening is required and that future actions will be towards lowering the rates. However, notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions.

Reserve Bank of India


Must ReadView All

Pic: Shutterstock

Apparel/Garments | On 2nd Aug 2021

Sourcing by garment brands increasingly moving out of China: ILO

The declining trend of China’s garment exports is in line with the...

Pic: Prada

Fashion | On 2nd Aug 2021

Online sales drive Italian luxury firm Prada's growth in H1 FY21

Despite continued restrictions, the Italian leader in luxury goods...

Pic: Ritu Manoj Jethani / Shutterstock.com

Apparel/Garments | On 31st Jul 2021

US firm Steve Madden moves production to Mexico & Brazil from China

As supply chain disruption remains a significant challenge, American...

Interviews View All

Textile Industry, Head honchos

Textile Industry
Head honchos

Main challenges are breakdown of supply chain and shrinkage of manpower

Water stewardship, Stakeholders

Water stewardship
Stakeholders

Water use efficiency remains relatively unexplored

Textile Industry, Head honchos

Textile Industry
Head honchos

There was a certain switch, but it was not 100% pandemic related

Nantas Montonati,

Nantas Montonati

The Riri Group is a one-stop supplier of metal accessories for the luxury...

Harleen Kaur,

Harleen Kaur

Established in 2017 and headquartered New York, the label Harleen Kaur...

Gus Bartholomew,

Gus Bartholomew

<b>Gus Bartholomew</b>, co-founder of SupplyCompass, explains to <b>Subir...

Shlomzion Chen, Seevix

Shlomzion Chen
Seevix

Seevix Material Sciences Ltd, which develops and manufactures synthetic...

Robert Brookins, Alexium International

Robert Brookins
Alexium International

Alexium International is a specialty chemical development company...

Pranesh Sridharan & Berndt Koll, Lenzing

Pranesh Sridharan & Berndt Koll
Lenzing

The Lenzing Group produces Lenzing Lyocell and Modal cellulosic fibres of...

Anjali Bhaskar, Samatvam

Anjali Bhaskar
Samatvam

Anjali Bhaskar has an experience of 12 years in the fashion industry. She...

Seema Agrawal, Artisan Saga

Seema Agrawal
Artisan Saga

Artisan Saga, founded by Kaushik Rajani and Seema Agrawal, is an online...

Archana Jaju, Label Archana Jaju

Archana Jaju
Label Archana Jaju

<b>Archana Jaju</b>’s Hyderabad-based eponymous label works with artisans...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

Leave your Comments


July 2021

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.


Advanced Search