The monetary-policy review is pro-economy...

The Reserve Bank of INDIA today unveiled its monetary policy review along the expected lines with a 25 basis points rate cut in the repo-rate, but did not stop at this when he (our governor) proposed a few more measures to improve liquidity thorough cuts in the MSF and daily CRR requirement by 75 basis points and 5%, respectively in a dovish stand. He maintained that the RBI is committed to resolve the problem of liquidity-deficit by adopting a liquidity neutral position, neither deficit nor surplus, in the coming days with various measures including the open-market-operations. Our governor lauded himself for initiating the marginal-cost-lending-rate (MCLR) framework which has forced the banks to reduce the borrowing cost even before the today’s 25 basis points cut which would also be translated into lower lending rates in the days ahead. He hoped that lower repo-rate and the MCLR could lower the lending rates by as much as 50 basis points very shortly. The RBI has continued with its accommodative standpoint to boost economic-activity and growth rate with further rate cut expectations in the current year depending on a good monsoon and lower inflation. It further expressed its concerns on the back of the 7^th Pay Commission that it might stoke demand and inflation in the presence of the supply side bottlenecks. Nonetheless, our governor has fulfilled his promise of rate cuts while the government adhered to its fiscal-deficit target. The RBI has set a target for inflation with the CPI at 5% for Jan, 2017, even when the WPI is expected to remain very low in the case of soften global commodity prices along with the oil. Our governor has upheld an accommodative and dovish stance as long as inflation remains under check, and, overall the language remained pro economy and pro growth-rate.