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RBI policy underlines recovery in some exports

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New Delhi: The Reserve Bank of India on Tuesday kept benchmark interest rates unchanged, even as governor Raghram Rajan said there were enough signs that the economy was on the path to recovery.

Rajan highlighted that there will be uneasy sentiments for global investor that will likely increase the imminent divergence in advanced economy monetary policy stances. He also said that the macro indicators suggest the economy is in the early stages of a recovery, though with some areas of continued weakness.

“Value added in agriculture and allied activities picked up on the modest increase in kharif output and timely policy interventions to stem the effects of the deficient south-west monsoon. Overall, the current outlook for agricultural growth in 2015-16 appears moderate at best at this juncture,” Rajan added.


Talking about the consumption ratio in the urban areas, he pointed that the stats are showing signs of a pick-up in some areas such as passenger vehicles sales, but rural demand has been weakened by two consecutive deficient monsoons and slowing construction activity.

Commercial vehicle sales and domestic civil aviation passenger traffic accelerated year-on-year. However, tourist arrivals, cargo handled at major ports, railway freight traffic, domestic and international air cargo traffic, and measures of construction such as steel consumption slowed.

“Households’ inflation expectations remain elevated although they have edged lower recently, perhaps in response to lower prices of petrol and diesel. Rural wage growth, as also corporate staff costs remain subdued,” Rajan said.

Indicating weakness in the global trade, rajan said that exports indicative of persisting weakness in global trade are declining. Excluding petroleum products, decline in exports more moderate and early signs of a turnaround visible in readymade garments, drugs and pharmaceuticals and electronics.

The RBI is likely to finalize methodology for determining base rate based on marginal cost of funds, government examining proposal to link small savings interest rates to market interest rates. This should help lower interest rates. (ANI)