Business

RBI's monetary policy review pragmatic, will boost economy: Government

Agency | February 07, 2019 02:41 PM

NEW DELHI: The government on Thursday welcomed RBI's decision to change its monetary policy stance to neutral and cutting its key lending rate for commercial banks to 6.25 per cent, saying it was a "very balanced and pragmatic policy statement" which will give a boost to the economy and lead to affordable credit for small businesses and homebuyers.

It also welcomed the Reserve Bank of India's (RBI) decision to remove the restriction on Foreign Portfolio Investors (FPI) which capped their exposure in a single corporate at 20 per cent of its corporate bond portfolio.

"RBI's decision to reduce the repo rate by 25 basis point from 6.5 per cent to 6.25 per cent and change of stance to 'neutral' will give a boost to the economy, lead to affordable credit for small businesses, homebuyers and others, besides boost employment opportunities," Finance Minister Piyush Goyal tweeted.

His remarks came after the RBI, in its final monetary policy review of the current fiscal, lowered its key lending rate for commercial banks to 6.25 per cent.

The central bank was also more accommodating, changing its monetary policy stance from "calibrated tightening" to "neutral".

"A very balanced and pragmatic policy statement. Assessment of growth and inflation is quite realistic and underlines low inflation and high growth path for India for 2019-20.

"Welcome change of stance to neutral and rate cut by 25 bps. Also welcome removal of FPI restriction," Economic Affairs Secretary Subhash Chandra Garg added.

While making the policy review announcement, RBI Governor Shaktikanta Das said that headline inflation was projected to remain soft in the near term reflecting the current low level of inflation and the benign food inflation outlook.

The RBI projected GDP growth to be in the range of 7.2-7.4 per cent in the first half of the next fiscal beginning April, and at 7.5 per cent in the third quarter "with risks evenly balanced".

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