Today's Paper

RBI holds interest rates, warns against fiscal laxity

The Reserve Bank of India (RBI) on Wednesday kept interest rates unchanged citing concerns about upward risks to inflation and cautioned the government against steps to relax fiscal discipline to spur growth as such a move could potentially adversely impact the deficit and add to inflationary pressure.

Holding the benchmark repurchase or repo rate at 6%, the RBI’s Monetary Policy Committee (MPC) trimmed its forecast for economic growth in the current fiscal year in gross value added (GVA) terms to 6.7% and also raised its projected range for CPI inflation in the second half to 4.2-4.6%.

Retail inflation edges up

“Retail inflation measured by year-on-year change in the consumer price index (CPI) edged up sequentially in July and August to reach a five-month high, due entirely to a sharp pick-up in momentum as the favourable base effect tapered off in July and disappeared in August,” the RBI said in the policy statement.

The MPC also observed that headline inflation rose by two percentage points since the August policy review.

“As noted in the August policy, there are factors that continue to impart upside risks to this baseline trajectory,” the central bank said.