Transmission of rate cuts improving steadily: RBI Governor




Reserve Bank of India (RBI) Governor Shaktikanta Das on Saturday said that transmission of policy rate is steadily improving.

While addressing the media in New Delhi, the RBI Governor said, “Impact of the rate cut has not plateaued. Transmission of rate cut has been witnessed in fresh rupee loan by 69 basis points. Transmission of policy rate is steadily improving.”

“The Monetary Policy Committee decided to pause because inflation is looking high,” he added.

The transmission of the monetary policy describes how changes made by the Reserve Bank to the cash rate – the ‘instrument’ of monetary policy – flow through to economic activity and inflation. Changes to the cash rate flow through to other interest rates in the economy.

The RBI governor also exuded confidence that India will be able to achieve its growth target of 6 per cent as projected by the Economic Survey.

“We have given a growth projection of 6 per cent for the next year, which is in line with Economic Survey projection.”

The year 2019 was a difficult year for the global economy with world output growth estimated to grow at its slowest pace of 2.9 per cent since the global financial crisis of 2009, declining from a subdued 3.6 per cent in 2018 and 3.8 per cent in 2017.

Uncertainties, although declining, are still elevated due to the protectionist tendencies of China and the United States besides and rising US-Iran geopolitical tensions.

Amid a weak environment for global manufacturing, trade and demand, the Indian economy slowed down with GDP growth moderating to 4.8 per cent in the first half of 2019-20, lower than 6.2 per cent in the second half of 2018-19.

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