“The policy rates will continue to be at low levels for a long period of time (and) they will go down even further,” Malhotra said in a post-monetary press conference.
Mumbai: Reserve Bank Governor Sanjay Malhotra on Friday said the key policy rates will remain at low levels for a long period and may go down even further.
The statement comes soon after the central bank decided to keep the repo rate unchanged at 5.25% at its bi-monthly monetary policy, and kept the stance neutral.
“The policy rates will continue to be at low levels for a long period of time (and) they will go down even further,” Malhotra said in a post-monetary press conference.
He, however, added that the decision on rates will be taken by the Monetary Policy Committee (MPC).
The RBI kept its benchmark interest rate unchanged on Friday, as expected, as inflation remained at manageable levels and growth concerns eased following increased government spending in the Budget and reduced tariff pressures after a trade deal with the United States. While inflation remains benign, economic activity remains resilient.
Since February last year, the RBI has reduced the repo rate by 125 basis points. The governor said policy transmission on the deposit side has been slower and interest rate on fixed deposits will be going down.
Replying to a question on the impact of recent trade deals signed by India, the governor said this, along with other factors, could add up to 20 basis points to the country’s GDP growth.
“Amidst heightened geo-political tensions and elevated uncertainty, the Indian economy is in a good spot with strong growth and low inflation. Inflation remains below the tolerance band and its outlook continues to be benign,” he said.
“With the signing of a landmark trade deal with the European Union and the US trade agreement in sight, growth momentum is likely to be sustained for a longer period.” Inflation is expected to average close to 2 per cent in the current financial year, below the central bank’s target of 4 per cent. GDP growth for the current fiscal year ending March 31 is forecast at 7.4 per cent.
Earlier, the RBI upwardly revised GDP forecast for the first and second quarters of the next fiscal year.
At the press conference, Deputy Governor T. Rabi Sankar said the RBI will be able to manage government borrowing programme comfortably.
The government’s gross borrowing has been pegged at Rs 17.2 lakh crore during the next fiscal year, while net borrowing was ₹11.73 lakh crore.
Malhotra added that T-bills will help manage yield curve and the government would be able to raise net borrowing of Rs 11.73 lakh crore at a reasonable rate.
On the Budget announcement regarding data centres, he said it will bring in a lot of foreign investments.
To a question, Mr. Malhotra said currency in circulation has increased quite a lot in the last one year.