GST roll out left short-term prospects uncertain, delayed investment: Urjit Patel
New Delhi: The Reserve Bank of India (RBI) Governor Urjit Patel on Wednesday announced keeping the repo rate unchanged at 6 per cent and the reverse repo rate unchanged at 5.75 per cent.
"The MPC noted that the implementation of GST had rendered short-term prospects uncertain, which delayed the revival of investment activity that is already hampered by stressed balanced sheets of banks and corporations," said Patel while addressing the media.
"Re-capitalising PSU banks is necessary to ensure that growth impulse is not restrained," added Patel while mentioning that the teething problems with GST might get resolved soon.
"The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of four percent within a band of two percent, while supporting growth," the central bank mentioned in its statement.
"Since the MPC's meeting in August 2017, global economic activity has strengthened further and become broad-based. Recent hurricanes could, however, weigh on global economic activity in the near term," added the statement.
"Market friendly reforms have been proposed including task force for public credit registry, framework for authorizing electronic trading platform, proposal for foreign exchange trading platform for retail users for better pricing and measures to improve sales," said RBI deputy governor, Viral Acharya.
Adding to this Acharya said that the corporate credit risk profile has shown signs of improvement.
The MPC, however, maintained a neutral stance in its approach, which means a chance of rate cut in the near future would be data driven.
India's factory output grew at a tepid 1.2 per cent in July as compared with a fall of 0.1 per cent in June, although there were signs that production would have risen in August and September as companies have begun restocking and building fresh inventories after clearing up the stockpile in the previous month ahead of Goods and Services Tax's roll out from July 1.
Factory output captured by the index of industrial production (IIP) is the closest approximation for measuring economic activity in the country's business landscape. IIP had grown of 4.5 per cent in July last year.
Manufacturing sector, which accounts for more than three-fourth of the entire index, continued to crawl at 0.1 per cent growth in July, compared with (-) 0.4 per cent in June and 5.3 per cent in the same period last year.
