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Minutes of the April 1 2015 Meeting of the Technical Advisory Committee on Monetary Policy

Dated:- 30-4-2015 - The thirty-eighth meeting of the Technical Advisory Committee (TAC) on monetary policy was held on April 1, 2015 in the run up to the First Bi-monthly Monetary Policy Review of 2015-16 on April 7, 2015.The main points discussed at the meeting are set out below. Members noted that global growth remained tepid and divergent. While high frequency indicators point to slowdown in China, growth in the US may face headwinds due to appreciation of the US dollar. Activity in the Euro .....

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t occurs. Members deliberated at great length on the GDP series revised by the Central Statistics Office in January 2015 estimating real growth in 2014-15 at 7.5 per cent. Most of the Members concurred that it was a challenge to understand the growth momentum under the revised series as all other indicators being tracked by analysts do not show that promising level of activity. The methodological note on compilation of national accounts was silent on the method of connecting the current series .....

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en in other sectors. Agricultural growth may be impacted by unseasonal rains that have damaged rabi crops on the back of an already lowered estimate of foodgrain production. Unlike the new GDP, IIP data seem to be in sync with other key indicators such as credit growth and auto sales. Some Members were of the view that there were signs of recovery, with pick-up in the services sector purchasing managers index, capital goods production exhibiting the fastest growth in seven months, and Labour Bur .....

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ained benign, deriving comfort from soft crude oil prices, monsoon uncertainties may create an upside risk to the inflation path. A Member felt that the level of inflation expectations in the economy is still high. Members noted that the current account deficit remained below 2 per cent of GDP for six consecutive quarters on account of a low trade deficit and expected that it may fall further with a pick-up in services exports following the US recovery. They expressed concerns about the near-te .....

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relative to South Asian countries where currencies have remained fairly stable. On policy action, four Members recommended reduction in the policy repo rate. Of them, two Members suggested a 50 basis points cut along with forward guidance of no further decline. According to these two Members, the current monetary policy stance was tight, causing deceleration in real private consumption demand. Indicators such as weak IIP growth, low capacity utilisation and stressed profitability of the corpora .....

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the policy repo rate by 25 basis points felt that the inflation excluding food and fuel has declined. Moreover, there has been a substantial drop in inflation expectations, and the current food induced inflation is temporary, warranting a policy rate reduction. However, given the uncertainties regarding the path of the fiscal deficit, the monsoon, and the way the US Fed will announce increases in its policy rate, the policy rate reduction ought to be by 25 basis points and not 50 basis points. T .....

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