The Reserve Bank of India (RBI) on Monday hinted at controlling fund flows or the market liquidity as it is known in the banking parlance, to take policy stance giving priority to both the growth-inflation balance and macro-financial stability.
In its macroeconomic and monetary developments review for April-June quarter, 2013-14; the central expressed hope for some improvement on growth front but the recovery is likely to be slow-paced. Professional forecasters outside the RBI have projected GDP growth at 5.7 percent, revised downwards from 6 percent in May 2013.
"Going forward, the Reserve Bank will endeavour to actively manage liquidity to reinforce monetary transmission that is consistent with the growth-inflation balance and macro-financial stability," the central bank said in the macroeconomic released a day before the first quarter monetary policy to be announced on Tuesday.
Also read: Is RBI June quarter policy a non-event?
Monsoon cheers...
This year, the flow of monsoon is going to spell cheers for the central bank, which expects a good rural demand due to the same. The Reserve Bank's production weighted rainfall index indicates that the rainfall so far was 17 per cent higher than the long period average. Water levels in major reservoirs are now 66 per cent above past average.
"The progress of monsoon has been encouraging and agricultural growth is likely to pick up. The Indian economy continued to remain sluggish in Q4 of 2012-13. Leading indicators do not suggest immediate improvement in production activity and a slow-paced recovery is likely to take shape only later in 2013-14, supported by good monsoon," RBI said.
Inflation worry not yet over
Even though the wholesale price inflation (WPI) has slipped below the 5 percent mark, the comfort zone for the central bank, the consumer price inflation (CPI) continues to haut the RBI with near double digit rate (9.87 percent in June). Upside risks persist with recent rupee depreciation and rise in crude prices amidst political uncertainties in the Middle East, RBI said.
More updates follow....
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