Scope
he highlights of the Reserve Bank of India's first quarter review of Annual Policy for 2006-07(April-March) released Tuesday:
Ø Reverse Repo rate hiked by 25 bps to 6.00%
Ø Repo rate hiked by 25 bps to 7.00%
Ø Bank Rate unchanged at 6.00%
Ø Cash reserve ratio unchanged at 5.00%
Ø Inflation target maintained at 5.0-5.5%
Ø Gross Domestic Product target maintained at 7.5-8.0%
INFLATION
Ø Upside risks to inflation evident as oil price pass-through
incomplete.
Ø Outlook for inflation firming up.
Ø Price stability created conducive conditions for growth.
Ø Petrol, diesel price hike in Jun added 45 bps to headline inflation.
Ø Risks to inflation amplified by intl oil price rise
Ø Inflation monitored with supply-side response from govt.
Ø Rise in local, global food prices relevant factor for inflation.
Ø Global risks noted in Apr policy "materializing", "heightening"
GROWTH
Ø Corporate performance remain robust despite some deceleration.
Ø Investment activity picking up; environment is of capital
expenditures by cos.
Ø Companies' order books expanding.
MONETARY AGGREGATES
Ø Non-food credit continued to expand at high rates.
Ø Banks continue to hold 1.5 trillion rupee excess SLR.
Ø Unwinding of excess SLR can accommodate demand for bank credit.
Ø Non-food credit growth remain high, comparable with highs of FY05.
Ø Monetary aggregates high on a year-on-year basis.
FINANCIAL MARKETS
Ø Interest rates, except money market rates, have hardened.
Ø Money market rates did not rise as liquidity ample.
Ø Rise in gilt yields "needs to be noted"
Ø Liquidity conditions, gilt yld need closer policy...
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