Finance Ministry says RBI's assessment of economy in line with govt's reading

The government, he said, welcomes the assessment made by the MPC.

New Delhi: The Finance Finistry Wednesday said the assessment of growth and inflation made by the RBI's Monetary Policy Committee (MPC) is line with government's reading.

"The assessment of the MPC for growth and inflation outlook is consistent with the Government’s assessment of inflation and growth, Subhash Chandra Garg, Secretary, Economic Affairs, in a statement.

Garg said that the government welcomes the assessment of the MPC. The Government notes its decision to maintain the Policy Rate. The policy stance probably required calibration, he added.  

The 6-member Monetary Policy Committee (MPC) panel headed by RBI Governor Urjit Patel kept the key lending rate unchanged at 6.5 percent in its Fifth bi-monthly meeting. The panel retained its GDP growth projection of the current fiscal at 7.4 percent and expects inflation to remain well below the mid-term target of 4 percent.

The RBI has also decided to reduce Statutory Liquidity Ratio or portion of funds banks have to mandatorily park in government securities from existing 19.5 percent to 18 percent in six quarterly instalments beginning January 2019.The MPC has, however, retained its stance of ‘calibrated tightening’.  

Next meeting of the six-member MPC will take place for three days from February 5, 2019.

The RBI has also decided to reduce SLR from existing 19.5 percent to 18.0 percent in six quarterly instalments beginning January 2019. Garg said that this will have some implications for the government securities. However, the momentum created by the reduction in oil prices and reversal of foreign flows has resulted in further moderation of yields post policy announcement, he concluded.

The GDP growth projection for 2018-19 is retained at 7.4 percent as in the Fourth Bi-monthly Resolution in October, 2018. The projections of inflation for 2018-19 and Q1:2019-20 have been substantially revised downwards from the October resolution.