• At its Mid Quarter Monetary policy review on the 17th of June, the Reserve Bank of India (RBI) maintained the benchmark repo rate at 7.25%, and the reverse repo rate at 6.25%.
• The Cash Reserve Ratio (CRR) was held at 4%, and the Statutory Liquidity Ratio (SLR) was maintained at 23%.
• The RBI expressed concern at the sudden, steep depreciation in the Rupee amid a high Current account deficit: key factors impacting its interest rate decision.
• It also highlighted high food and administered price rises, which when combined with a weaker rupee, could generate second-round inflation effects.
• This is against a backdrop of falling wholesale and core inflation, as well as soft activity indicators.
• On a more positive note, ratings agency Fitch has upgraded India’s outlook to stable on an improved fiscal outcome and some progress on tackling structural problems in the economy.
• Further cuts to the repo rate will depend on a more sustained decline in inflation: a more stable rupee, a contained current account deficit and a moderation in food price inflation.

For further analysis download the full report.

India Monetary Policy Review – June 2013 (PDF 333 KB)