RBI monetary policy review 2018-19: The Reserve Bank of India (RBI) is just few hours away from presenting the first monetary policy of the fiscal year FY19, and many economists have already projected a status quo in this review for the third time in a row. RBI kept policy repo rate unchanged at 6% since past three monetary policy meetings along with accommodative stance due to fear of higher inflation and macro-economic data.

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The six-member Monetary Policy Committee including the RBI governor Urjit Patel held a meeting on Wednesday for discussing the policy, and on April 05 i.e is tomorrow, the resolution of the meet will be announced for all. 

Here’s a list of ten factors, that will impact RBI’s decision in this monetary policy, as per Care Ratings. 

Bank Deposits

For the period April – 16th Mar’18, deposits at Rs 111.61 lakh crore grew by 3.7% lower than 12.5% growth witnessed in the corresponding period last year. This can be ascribed to households migrating from deposits to mutual funds on account of better returns in the market.

In addition to this, last year numbers include the impact of demonetization where the deposit inflows had increased sharply.

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However, inflation in non-food items including fuel, housing and clothing and footwear continue to remain high. Also, RBI has estimated CPI to average 5.1-5.6% in 1HFY19 during last fiscal.

This is a signal that interest rates may not be eased this year and that there could be an increase. 

GSec yields

The yields have increased from 6.6% on 3rd April’17 to 7.4% in 28th March’18. 

The yields are expected to harden as higher demand for credit from farmers, industry and retail segment in second half of FY19 could pressurize liquidity further.

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The CSO also released second advance estimate numbers for the entire fiscal year FY18. 

As per the CSO, the growth in GDP during 2017-18 is estimated at 6.6% as compared to the growth rate of 7.1% in 2016-17.

Gross Value Added (GVA)

GVA at basic prices at constant (2011-12) prices in Q3 of 2017-18 is estimated at Rs 30.11 lakh crore, as against Rs 28.21 lakh crore in Q3 of 2016-17, showing a growth rate of 6.7%.

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During February last year, it was 5.51%. Build up inflation rate in the financial year so far was 2.30% compared to build up rate of 4.92% in the corresponding period of the previous year. 

Index of Industrial Production

Index of Industrial Production (IIP) or factory output for the month of December 2017 came in at 7.1%, compared to 8.4% in November 2017 and 2.2% in the month of October 2017. 

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Cumulative growth of IIP for the period April-December 2017 over the corresponding period of the previous year stands at 3.7%. 

Thus economists at CARE said, “Given these considerations, RBI is likely to maintain an unchanged stance on policy rates. The important issue will be the tone of the policy- will it be hawkish or neutral. We would tend to think that there would be more than neutral indications with a tint of hawkishness.”