The Reserve Bank of India (RBI) on Wednesday said that it is keeping repo rate unchanged at 6.25%. 

RBI said, "The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5% by Q4 of 2016-17 and the medium-term target of 4% within a band of +/- 2%, while supporting growth. The main considerations underlying the decision are set out in the statement below."

The Central Statistics Office (CSO) released its advance estimates for 2016-17 on January 6, placing India’s real GVA growth at 7.0% for the year, down from 7.8% (first revised estimates released on January 31) a year ago. 

Giving its own growth assessment, RBI said:

• GVA growth for 2016-17 is projected at 6.9% with risks evenly balanced around it. 

• Growth is expected to recover sharply in 2017-18 on account of several factors.

• First, discretionary consumer demand held back by demonetisation is expected to bounce back beginning in the closing months of 2016-17. 

• Second, economic activity in cash-intensive sectors such as retail trade, hotels and restaurants, and transportation, as well as in the unorganised sector, is expected to be rapidly restored. 

• Third, demonetisation-induced ease in bank funding conditions has led to a sharp improvement in transmission of past policy rate reductions into marginal cost-based lending rates (MCLRs), and in turn, to lending rates for healthy borrowers, which should spur a pick-up in both consumption and investment demand.

• Fourth, the emphasis in the Union Budget for 2017-18 on stepping up capital expenditure, and boosting the rural economy and affordable housing should contribute to growth. 

• Accordingly, GVA growth for 2017-18 is projected at 7.4 per cent, with risks evenly balanced.