5 things to watch for at RBI monetary policy meeting today

As metal prices go up India will cease to be a dumping ground for aluminium scrap Anil Agarwal Vedanta

The reverse repo rate is used by the monetary policy committee as a tool to control the money supply in the country. However, it announced statutory liquidity ratio (SLR) will go down by 25 bps every quarter from January. Currently, SLR stands at 19.5 percent. At present, the Cash Reserve Ratio (CRR) balance of banks at the end of the day is being disclosed with a lag of 2-3 days, while the details of the currency in circulation are being released with a lag of one week.

The liquidity coverage ratio (LCR) refers to highly liquid assets held by banks to meet short-term obligations. The RBI retained the GDP growth projection at 7.4 per cent for financial year 2018-19.

RBI changed the policy stance to "calibrated tightening" from "neutral", while affirming its commitment to achieve the medium-term objectives to contain price rise. For the period October-March, the GDP growth forecast is pegged between 7.2 and 7.3 percent.

Under the country's new economic program announced on September 20, the inflation target for this year is 20.8 percent, 15.9 percent for 2019, 9.8 percent for 2020, and 6 percent for 2021.

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What could be RBI's likely rate action? RBI governor Urjit Patel had said calibrated tightening essentially meant that during this cycle, a rate cut would not be considered and that the central bank was not bound to increase rates at every policy meeting.

After back-to-back hikes since June, the RBI had kept interest rates unchanged in October, surprising markets that had expected a rate hike to support the tumbling rupee and combat inflationary pressures from high oil prices. For the first half of 2019-20, the GDP is been projected at 7.5 per cent. RBI said inflation in the second half of the current fiscal is projected at is projected at 2.7-3.2 per cent.

The board members include RBI governor Urjit Patel, RBI deputy governor Viral Acharya, executive director Michael Debabrata Patra, IIM Ahmedabad professor Ravindra H Dholakia, Delhi School of Economics director Pami Dua and Indian Statistical Institute Professor Chetan Ghate.

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