First Bi-monthly Monetary Policy Statement, 2017-18

First Bi-monthly Monetary Policy Statement, 2017-18 Resolution of the Monetary Policy Committee (MPC) Reserve Bank of India

Question: What is the reverse repo rate under the liquidity adjustment facility according to the first Bi-monthly Monetary Policy statement, 2017-18?
(a) 6.25 percent
(b) 6.0 percent
(c) 5.75 percent
(d) 5.50 percent
Ans: (b)

  • Reserve Bank of India released First Bi-monthly Monetary Policy Statement, 2017-18 on 6th April, 2017.
  • The RBI has kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 per cent.
  • The reverse repo rate under the LAF is at 6.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate are at 6.50 per cent.
  • The Bi-monthly Policy statement targets medium-term consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
  • The statement also quotes the Central Statistics Office (CSO) second advance estimates for 2016-17 released on February 28, placing India’s real GVA growth at 6.7 per cent for the year, down from 7 per cent in the first advance estimates released on January 6.
  • Foodgrains production has touched an all-time high of 272 million tonnes, with record production of rice, wheat and pulses.
  • Industrial output, measured by the index of industrial production (IIP), recovered in January from a contraction in the previous month, helped by a broad-based turnaround in manufacturing as well as mining and quarrying.
  • Activity in the services sector appears to be improving as the constraining effects of demonetisation wear off. After three consecutive months of contraction, the services PMI for February and March emerged into the expansion zone on improvement in new business.
  • After moderating continuously over the last six months to a historic low, retail inflation measured by year-on-year changes in the consumer price index (CPI) turned up in February to 3.7 per cent.
  • Excluding food and fuel, inflation moderated in February by 20 basis points to 4.8 per cent, essentially on transient and item-specific factors.
  • With progressive remonetisation, the surplus liquidity in the banking system declined from a peak of Rs.7,956 billion on January 4, 2017 to an average of Rs.6,014 billion in February and further down to Rs.4,806 billion in March.
  • Merchandise exports rose strongly in February 2017 from a subdued profile in the preceding months. Growth impulses were broad-based, with major contributors being engineering goods, petroleum products, iron ore, rice and chemicals.
  • Balance of payments data for Q3 indicate that the current account deficit for the first three quarters of the financial year narrowed to 0.7 per cent of GDP, half of its level a year ago.
  • The level of foreign exchange reserves was US$ 369.9 billion on March 31, 2017.
  • GVA growth is projected to strengthen to 7.4 per cent in 2017-18 from 6.7 per cent in 2016-17

Reference:
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=40069