The two days Monetary Policy Committee of Reserve Bank of India meet have been started from today (Tuesday). The six members team, chaired by the Reserve Bank of India governor who will deliberate the current scenario and take a right decision whether to cut key rates, increase them or just maintain the status quo. Patel’s second monetary policy as the RBI Government will be on 7th of December.
According to the present scenario stands, the most important aspect of two days discussions for the Reserve Bank of India panel will be the government’s demonetization of money move, which has taken a country’s economy by blast since the removal of 500 rupees and 1000 rupees legal tenders from the system.
Experts said the same view related to demonetization of note that ban on Rs 500 and Rs 1,000 currency notes would impact country’s GDP growth. Former Prime Minister of India, Manmohan Singh had said in Rajya Sabha that, GDP growth will fall by 2 percentage points due to demonetization of notes. This number was apart from a 1 percentage point fall predicted by other financial experts.
In the after chain reaction of the decision ” to remove black money, corruption and stall terror funding”, the country’s demand and the consumption have taken a big hit. Whereas, many small business and logistics have been reportedly come to stand against the decision of demonetization of money. While the numbers aren’t yet out on what demonetization has caused a country in terms of a loss to their business, many brokerages and experts have already lowered their estimates for the Fiscal Year 17 GDP as a direct impact of demonetization.
In the month of November, the country’s manufacturing and services sector took a hit, as a direct fallout of the demonetization step. Nikkei’s India Manufacturers’ Purchasing Managers’ Index (PMI) in November fell to 52.3 index points from 54.4 while the Services Purchasing Manager’s Index (PMI) fell to 46.7 index points from 54.5. A figure above 50 indicates expansion in the sector while a figure under 50 indicates contraction.
At the same time, inflation targeting was set as the main and only agenda for the Reserve Bank of India (RBI) and the monetary policy panel for this, the central bank is expected to stay focus on growth. Although, the inflation remains within the reach of their target. Will the central bank hold rates or cut? We will come to know regarding this on Wednesday