New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

Third Bi-monthly Monetary Policy Statement 2016-17 (By Dr. Raghuram G. Rajan Governor)

News and Press Release - Dated:- 9-8-2016 - Monetary and Liquidity Measures On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to: keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent; keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL); and continue to provide liquidity as required but progressively lower the average ex ante liquid .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

still mixed. Headwinds in the United States from declining inventory investment were offset somewhat by strong payroll numbers. In the Euro area, the re-emergence of stress in some parts of the banking sector and the Brexit vote increased uncertainty. In Japan, downside risks have intensified in the form of a stronger yen, deflationary risks and contracting industrial production, triggering monetary and fiscal stimuli. 3. Among emerging market economies, activity remains varied. GDP growth stab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d equities plunged worldwide, currency volatility increased and investors herded into safe havens. Since then, however, equity markets have regained lost ground. Currencies, barring the pound sterling, have stabilised, with the yen appreciating the most on risk-on demand as well as the announcement of fresh stimulus. Yields on government bonds have fallen further and the universe of negative yielding assets is expanding at a fast pace, reflecting high risk aversion and expectations of further mo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

age, with more than 80 per cent of the country receiving normal to excess precipitation. Kharif sowing strengthened after a lacklustre start, particularly with respect to pulses. Barring cotton, jute and mesta, sowing of all crops is currently above last year s acreage. These developments engender greater confidence about the near-term outlook for value added in agriculture. The target for kharif production set by the Ministry of Agriculture appears within reach. 6. Industrial production picked .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ector is indicative of weak investment demand. The rate of contraction in consumer non-durables slowed, pointing to some revival in rural demand. On the other hand, the pace of growth of consumer durables has been stable and buoyed by urban consumption demand, although it eased in May on base effects. Barring the contraction in natural gas and crude oil on account of structural bottlenecks, the core sector has been resilient as of 2016-17 so far, and should support industrial activity going forw .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

acceleration in new business. Business expectations remained optimistic on better economic conditions and planned increases in marketing budgets. High frequency indicators of service sector activity are still, however, emitting mixed signals, although a larger number of indicators are in acceleration mode in Q1 of 2016-17 than in the preceding quarter. Automobile sales across most segments, railway, port and international air freight traffic, foreign tourist arrivals, and domestic air passenger .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

after two successive years of drought. While pulses inflation started moderating, prices of pulses have been rising again since April after a short-lived correction in the previous quarter. Inflation pressures are also incipient in cereals. These developments fed through into households inflation expectations three months ahead, reversing the decline seen in the last two quarters. 9. Fuel inflation remained subdued, mainly due to sustained deflation in prices of liquefied petroleum gas. Excludi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the organised sector were relatively restrained. 10. Liquidity conditions eased significantly during June and July on the back of increased spending by the Government which more than offset the reduction in market liquidity because of higher-than-usual currency demand. The injection of durable liquidity through purchases under open market operations (OMOs), amounting to ₹ 805 billion so far, also helped in easing liquidity conditions, bringing the system-level ex ante liquidity deficit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng the easy liquidity conditions, the weighted average call rate (WACR) and money market weighted average rate remained on average 15 basis points below the policy repo rate since June. Interest rates on other money market instruments such as certificates of deposit (CDs) and commercial paper (CPs) have also declined in both the primary and secondary markets. 11. In the external sector, merchandise export growth moved into positive territory in June after eighteen months. This upturn was reasona .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eel and machinery and transport equipment. Cumulatively, the trade deficit narrowed in Q1 of 2016-17 on a year-on-year basis. Net receipts on account of services remained flat in April-May 2016, with net outflow under communication services and sluggish software earnings. While the pace of foreign direct investment inflows slowed in the first two months of 2016-17, net portfolio flows were stronger after the Brexit vote, notwithstanding considerable volatility characterising these flows. The lev .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n s steady progress, along with supply management measures, augers well for the food inflation outlook. The prospects for inflation excluding food and fuel are more uncertain; if the current softness in crude prices proves to be transient and as the output gap continues to close, inflation excluding food and fuel may likely trend upwards and counterbalance the benefit of the expected easing of food inflation. In addition, the full implementation of the recommendations of the 7th central pay comm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pected from the disbursement of pay, pension and arrears following the implementation of the 7th CPC s award. The passage of the Goods and Services Tax (GST) Bill augurs well for the growing political consensus for economic reforms. While timely implementation of GST will be challenging, there is no doubt that it should raise returns to investment across much of the economy, even while strengthening government finances over the medium-term. This should boost business sentiment and eventually inv .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y at this juncture evenly balanced around it (Chart 2). 14. Risks to the inflation target of 5 per cent for March 2017 continue to be on the upside. Furthermore, while the direct statistical effect of house rent allowances under the 7th CPC s award may be looked through, its impact on inflation expectations will have to be carefully monitored so as to pre-empt a generalisation of inflation pressures. In terms of immediate outcomes, much will depend on the benign effects of the monsoon on food pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version