Franklin India Growth A

For financial year 2016–2017, the RBI forecasts the GVA growth at a 7.6% pace. This assumes that there aren’t any significant headwinds.

Indian stocks had a great March. The rebound began after the Union Budget announcement on February 29. The fiscal discipline shown by the government raised hopes that the Reserve Bank of India may reduce interest rates.

Even before the repo rate cut on April 5, the RBI reduced its key rate by 125 basis points since January 2015.

Banks saw a rise in term deposit accounts since the demonetization. As a result, commercial banks sharply reduced their deposit rates.

Importance of policy transmission Monetary policy transmission refers to the translation of monetary policy actions into the financial system via banking and trading channels. By changing the short-term interest rate—like the repo rate in India or the federal funds rate in the US—a central bank signals other banks to change their lending and deposit rates. […]

“Policy transmission” refers to the translation of monetary policy actions into the financial system through the banking and trading channels.

Industrial production remains a problem for India, with the RBI (Reserve Bank of India) noting that the index measuring industrial production decelerated in fiscal 2015–16.

The RBI’s assessment was that the CPI inflation would rise after September—based on the fact that the base effect, which has kept it down, would wear off.

The pass-through of the rate cuts by banks to the general public is an important concern for the Reserve Bank of India.

According to the RBI, consumer price index inflation is expected to begin rising in September 2015 and continue rising for a few months.

Though there were expectations for a repo rate cut, a reduction of 50 basis points did not seem to be on everyone’s radar.