Monetary policy of RBI- October 2016

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More reasons to celebrate this festive season as we got RBI easing our spending and fuelling economy. Bonanza time for the industries, investors and property buyers as this time your efforts are rewarded by our central bank chief. True to the guess RBI fuelled our spending by taking lesser part of the cake retaining larger for the consumers.
Monetary policy proposed for the first time by the committee was held on 04.10.2016 at 2.30pm IST. The practice of monetary policy announcement of RBI was not new, but the timing which matters. We have witnessed a beautiful transition. Oct 2016 has to be marked with bold letters in the economic history of India as our central bank moved away from a practice of formulating policy by a single person to a multi-person, multi-discipline exercise. True to its nature, monetary policy is the one which influence the spending and saving habits of individuals, keep the industries buoyant hence accelerating the economy. It is in this line of thinking that monetary policy has got its own focus by varied class of people viz. be a strategist, economist or analyst for that matter.
Fuelled by modest decline in retail inflation and wholesale inflation under control, Dr Urjit Patel and committee (MPC) batted for rate cut in its policy announcement. Given the moderate outlook of performance in core sector (just 2.4% growth- july) and healthy appearance of monsoon across India favors rate cut.  RBI reduced its policy repo rate by 25 basis to 6.25%. Maintaining all key interest rates at the same level, Diwali bonus arrived just in time even the markets celebrated with immediate 100 points up in sensex.

A grim situation around the world particularly in US and other emerging markets, India identified as bright spot for investment. A healthy interest rate is positive supplement favoring more spending by people as there is series of festive seasons. Cashing in this advantage MPC has rightly reduced it.    

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