The Reserve Bank of India on Wednesday left lending rates unchanged, citing risks to inflation due to spurt in farm loan waivers by states. However, it raised the lending capacity of banks to support economic growth.
The government has been pressing for a cut in interest rates to increase private investment, and had sought a meeting with the members of the Monetary Policy Committee, but RBI Governor Urjit Patel said that all of them declined to meet.
The RBI also said that they expect retail inflation to fall to 2-3.5 percent in the first half of current fiscal.
However, it can move up to 4.5 percent in the second half as rush for farm loan waivers may have inflationary spillovers, the RBI said.
The abrupt and significant retreat of inflation in April from the firming trajectory that was developing in February and March has raised several issues that have to be factored into the inflation projections, it said.
In its second bi-monthly monetary policy statement of 2017-18, the Reserve Bank said the prices of pulses are clearly reeling under the impact of a supply glut caused by record output and imports.
The earlier projection for the retail inflation in first half of the fiscal was 4.5 per cent and 5 per cent in second half.
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