RBI monetary policy meet: Monsoon forecast makes cbank revise upwards agriculture estimates

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), headed by governor Urjit Patel, today hiked repo rate by 25 bps to 6.25 per cent after the conclusion of the second bi-monthly policy meet. The MPC, however, revised upwards estimates for agriculture and allied activities based on predictions of normal monsoon.
  
The second bi-monthly Monetary Policy Statement 2018-19 said that the MPC has revised upwards the estimates of agriculture and allied activities on the supply side supported by an all-time high production of food grains and horticulture during the year.
 
The statement said that on a quarterly basis, agriculture growth increased sharply in Q4 of fiscal 2017-18. Citing monsoon picture, it said that the India Meteorological Department (IMD) on April 16, had forecast a normal south-west monsoon rainfall, which was reaffirmed on May 30. The committee feels that the forecast of normal monsoon this year augurs well for the agricultural sector.
 
The six-member panel also said that if the monsoon is normal and well-distributed, temporally and spatially, it may help keep food inflation benign based on the IMD forecasts.
 
The MPC also noted that the impact of revision in the Minimum Support Price (MSP) formula for kharif crops is not possible to assess at this stage due to the absence of adequate details.
 
Talking to media persons, RBI governor Urjit Patel said that for FY19, the forecast of a normal south-west monsoon augurs well for agriculture sector, as input cost pressures are firming up. He said cost of farm outputs has risen sequentially.
 
"Domestic economic activity has exhibited revival in recent times, Patel said, adding "farm loan waivers have been done through budgets of individual state governments, so there is no implications on banks' NPA." 

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Notably, Dr. Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Dr. Viral V. Acharya and Dr. Urjit R. Patel voted in favour of the decision to hike repo rate after the conclusion of the second bi-montly policy meet. The minutes of the MPC’s meeting will be published by June 20, 2018, while its next meeting is scheduled on July 31 and August 1, 2018.