By Ruma Dubey

RBI did the expected. There was no change. With Budget just round the corner and CPI showing signs of going up, Chinese turmoil – all were clear indications that the RBI was no way going to hike rates. Companies are crib and cry that they are facing a liquidity crunch but it was a given that RBI would not budge, at least not now.

A quick look at the highlights of the policy:

• Policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.75 per cent;
• Reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at7.75 per cent.
• Cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL);
• To continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions;
• To continue with daily variable rate repos and reverse repos to smooth liquidity.
• The average daily liquidity injection (including variable rate
• Overnight and term repos) increased from Rs.1,200 billion in December to about Rs.1,345 billion in January. In addition, the Reserve Bank also injected Rs.200 billion through open market purchase operations on December 7 and January 20.
• As on January 22, 2016, foreign exchange reserves stood at US$ 347.6 billion – an accretion of US$ 5.9 billion during the current fiscal so far.
• January 2016 target of 6% CPI inflation should be met, implementation of 7th pay commission has not been factored in inflation forecast.
• Inflation is expected to be inertial and be around 5% by the end of fiscal 2016-17
• Keeps GVA growth forecast for FY16 at 7.4% with downward bias.
• The near-term outlook for industrial activity may be constrained by adverse base effects in Q4 and still weak exports, although the pick-up in corporate profitability on the back of declining input costs may provide an offset.
• In keeping with the Government’s Start-up India initiative, the Reserve Bank will take steps to ease doing business and contribute to an ecosystem that is conducive for growth of start-ups.
• Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of 2016-17.

The big policy will be on 5^TH April – the next Policy date and that being after the Budget, we could see some action then. For now, we can once again sit and look for triggers. Q3 numbers will continue to dictate stocks for some time…