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Summary of the Electronic Consultation with the Technical Advisory Committee on Monetary Policy January 2016

News and Press Release - Dated:- 22-2-2016 - Consultation with external Members of the Technical Advisory Committee (TAC) on Monetary Policy was held electronically during January 19-22, 2016 in the run up to the Sixth Bi-monthly Monetary Policy Review, 2015-16 on February 2, 2016. The main points made by Members are set out below. 1. Members expressed concern on global developments. Overall growth in the US in 2016 will slow towards trend, with underlying US domestic economy looking solid. Macr .....

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was the lowest last year since 1990. China has to deal with large debt and excess capacity in several industries such as steel. 2. On domestic growth, Members were of the view that the economy has stabilised, and appears to be on a path of a modest recovery. While the November IIP collapse suggests a slowing down of economic activity (partly also due to festival induced fewer working days), a smoothed average over October-November suggests a slow but gradual revival in economic activity. However .....

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ushing capex down, suggesting that private investment is likely to be flat in the short term. Third, even though public investment in 2015-16 increased to compensate private investment, the absorptive capacity of the economy may be limited. On the fiscal front, there has been a significant improvement in fiscal balances, alongside a shift from revenue to capital expenditures, with a general improvement in the aggregate fiscal position of the states. 3. While most Members felt that the 6 per cent .....

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ent of deflation in WPI has slowed. The disinflationary pass-through from lower crude oil prices will be mitigated by the recent nominal depreciation of the rupee, coupled with future increases in excise duties. While the government has managed food inflation well, there were several risks to the evolution of headline and core inflation in the medium term. First, following the implementation of the Seventh Central Pay Commission (7th CPC) recommendations whether the economy will see a wage-price .....

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are elevated - this may be related to the problem of expectation formation being adaptive. 4. On the external sector, Members did not see severe balance of payments risks, although capital outflows were a concern. Recent exchange rate volatility was related to the language coming from the US Federal Reserve on the speed of lift-off from the zero interest rate policy (ZIRP). Faltering growth from China and other EMEs will continue to lead to outflows of capital from EMEs including India, leading .....

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ews on managing exchange rates - one Member opined that the rupee should be allowed to depreciate, so as to correct the 36-currency REER appreciation over the last year or so; another Member was of the view that the caps on debt flows and shift to longer-run debt will be protective during market stress; yet another Member felt that pushing masala bonds even with a premium to be paid to borrow overseas in the domestic currency requires to be stepped up. 5. For the sixth bi-monthly monetary policy .....

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