The Reserve Bank of India (RBI) kept interest rates on hold at 7.50 per cent on Tuesday, choosing to wait longer to assess inflationary pressures before making its next move, and to give banks more time to adjust lending rates to reflect previous rate cuts.
Most of the 40 economists surveyed by Reuters had expected the RBI to keep the key lending repo rate unchanged at Tuesday's policy review.
COMMENTARY:
Shakti Satapathy, fixed income strategist at AK Capital:
"As expected the RBI maintained a status quo with a clear line of communication with regards to further monetary easing. Though the inflationary situation and government measures to combat supply side effects have started showing signs of improvement, the realization of the same seems to be a medium- term affair. Further the key to a likely 25 bps cut would be dependent on lending rate revision by the bankers, provided both the above mentioned measures progresses well in the right direction."
R. Sivakumar, head of fixed income at Axis Asset Management:
"Policy will remain data driven. For the rest of the year, one can expect 25-50 bps cut, but timing of the same is a tough call. Changes in bond markets are quite positive.
"The RBI now expects primary dealers to offer liquidity in semi-liquid government securities, which should improve the structure in bond markets. Changes on external commercial borrowings for corporates would also have a positive impact."
Abheek Barua, chief economist at HDFC Bank:
"I am a little disappointed as I was expecting a rate cut. But the way policy is conducted these days all the rhetorical language doesn't mean much and it's entirely data driven. It's quite possible that we get a nice retail inflation print and the RBI would move. One critical thing that RBI has said is to wait for the impact of its front-loaded rate cuts on bank lending rates. I think that will happen very soon and if data is supportive of a rate cut we might see one between policies."
Radhika Rao, economist at DBS, Singapore:
"Benchmark rates were left unchanged on concerns over near-term sticky inflation. Calls to lower the cash reserve ratio to aid policy transmission were meanwhile left unanswered, as we expected.
"While a lower CRR might have eased liquidity conditions without straining banks' interest margins, its uncertain whether that would have been enough to trigger cuts in base lending rate cuts or stoked credit growth. As far as policy transmission is impaired due to weak credit demand and concern over banks' asset quality, infusion of additional liquidity might not do the trick. Marginal impact on the base rate during the 2012-13 rate cutting cycle also does not set an encouraging precedent."
Growth in India's pivotal services industry lost some momentum in March as input prices rose at the fastest pace in nearly a year, a business survey showed.
The RBI chief said on Thursday that the country's push to build infrastructure should not come at the expense of financial stability, adding banks already had too much exposure to the sector.
Indian manufacturing growth accelerated in March after a jump in demand even though firms pushed up prices at the fastest rate in four months, a business survey showed.
India's April-February fiscal deficit was at Rs 6.03 lakh crore.
The RBI relaxed rules for foreign investors in exchange-traded currency derivatives by increasing the trading limits allowed without an underlying exposure for the USD/INR pair to $15 million per exchange from $10 million earlier.
India's wholesale prices declined at a much faster-than-expected pace of 2.06 per cent on year in February, their fourth straight monthly fall, on the back of plunging global oil prices, government data showed.
India's consumer inflation edged up in February for the third straight month, mainly driven by food prices, underscoring the risk of a rebound in inflationary pressures from rising commodity prices.
India's industrial output growth accelerated to 2.6 per cent in January, mainly driven by growth in the capital goods sector, government data showed.
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