RBI keeps key rates on hold at 6.75 pc

With prospects for the rabi harvest  improving slowly, Rajan believes the near-term outlook for industrial activity may be constrained by adverse base effects in Q4 and still weak exports, although the pick-up in corporate profitability on the back of declining input costs may provide an offset. Some categories of services are likely to gain momentum on expectations of higher activity in coming months, though the aggregate state of activity remains muted. On balance, therefore, gross value added (GVA; a measure of output) growth for 2015-16 is kept unchanged at 7.4 per cent with a downside bias.

 

The policy report also mentioned that inflation has evolved closely along the trajectory set by the monetary policy stance. With unfavourable base effects on the ebb and benign prices of fruits and vegetables and crude oil, the January 2016 target of 6 per cent should be met. Going forward, under the assumption of a normal monsoon and the current level of international crude oil prices and exchange rates, inflation is expected to be inertial and be around 5 per cent by the end of fiscal 2016-17.

 

The policy report also highlighted that in keeping with the central government’s Start-up India initiative, RBI will take steps to ease doing business and contribute to an ecosystem that is conducive for growth of start-ups. These measures will create an enabling framework for receiving foreign venture capital, differing contractual structures embedded in investment instruments, deferring receipt of considerations for transfer of ownership, facilities for escrow arrangements and simplification of documentation and reporting procedures.