One thing you have to give credit to the Namo government is its ability to keep the fiscal deficit low and the inflation low. Partially it could be luck, but it surely is a lot of skill, and co-ordination between the Govt. and the Reserve bank of India.

Here is a review of what the RBI announced yesterday. Let me repeat this is a post meant only for students – your interest in RBI rate movement should just be academic. It need not (must not) influence your sip, etc. Yes, your interest rate (and therefore prices) expectation should be lowered by a small number. Other than that you can skip this post, unless if you are an MBA student..wanting to cut paste some stuff..like I have done from the speech!!

1. RBI reduced the repo rate from 6% to 5.75% – which seems to be the lowest since 2010 – that is about 9 years ago. One more cut and we would be down to a 10 year low I guess.
2. RBI has revised its inflation and growth forecasts. Inflation for H1 and H2
   2019-20 in April policy was projected in the range of 2.9-3.0 per cent and 3.5-3.8 per cent, which is now changed to 3.0-3.1 per cent for H1 and 3.4-3.7 per cent for H2, with risks broadly balanced. GDP growth for H1 and H2 2019-20 is now changed to 6.4-6.7 per cent for H1 and 7.2-7.5 per cent for H2. This is a slight downward push. Headline CPI inflation rose to a six-month high of 2.92% (YoY) in April (compared to 2.86% in March), primarily due to rising food prices.  However, core inflation (excluding food) was down to a 21-month low of 4.50% in April (5.00% in
   March). This is a significant moderation, reflecting current su bdued demand conditions in the economy.
    WPI inflation eased to 3.10% in April (YoY) against 3.18% (YoY) in March, primarily because of cheaper fuel and manufactured items.
    Inflation expectations of households, measured by the May 2019 round of the Reserve Bank’s survey, softened by 20bps for the 3-month ahead and unchanged for 12-month ahead horizon.

High frequency lead indicators such as weak auto sales, air passenger traffic (which could have even by due to the grounding of Jet Airways, and thus withdrawing supply of seats) , muted growth in personal and consumer loans (was it caused by the inability of Nbfc like Dhfl to lend money?) and sluggish rural demand suggest a moderate pace of growth in private consumption expenditure. Latest PMI data also suggest a slower pace of expansion in the manufacturing and service sectors. Although, private consumption is expected to get a fillip from the PM Kisan Samman Nidhi scheme for farmers and expected increase in disposable income of households due to income tax benefits.
Q4 GDP number shows a slower pace of growth in the investment activity. However, resolution of stressed assets is expected to improve credit flow along with a pickup in fixed investment supported by higher construction activity is expected to drive investment activity. Further acceleration in capacity utilization and credit to the industry sector could improve the growth prospects. On the other hand, government expenditure is expected to pick up with a focus on agriculture and rural economy.

Nothing really great about this policy, but it was watched with interest – it is the first one post Namo term 2.