Outlook for agriculture, rural demand robust with normal monsoon: RBI

The Reserve Bank of India (RBI) Governor Urjit Patel smiles while attending a seminar during the Vibrant Gujarat investor summit in Gandhinagar, India, January 11, 2017. REUTERS/Amit Dave - RTX2YGT5

With a normal southwest monsoon for the second straight year and healthy cultivation of Kharif crops, the Monetary Policy Committee (MPC) noted that the outlook for agriculture appears robust. This improves the prospects of agricultural and allied activities and rural demand.

In its third bi-monthly monetary policy meeting for FY18, the committee decided to cut the policy repo rate by 25 basis points to 6 per cent.

Talking about the inflation, which was near an 18-year low in June, RBI Governer Urjit Patel said "In respect of inflation-sensitive vegetables, prices are recording spikes. Excess supply conditions continue to push down prices of pulses and keep those of cereals in check."

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While the rainfall across the country, as on August 1, was one percent above the long period average, 84 percent areas received more than normal rainfall. This has led to an increase in the Kharif crop sowing. While crops, such as sugarcane, jute and soyabean, have seen near complete full-season sowing, cultivation of oilseeds is lagging.

The uncertainty over sowing of pulses, except tur and rice, has also dissipated. All this is expected to help the Agriculture Ministry achieve its 2017-18 crop production target, which is higher than the last year.

Due to the procurement operations for rice and wheat during the rabi marketing season, stocks have risen to 1.5 times the buffer norm for the quarter ending September, the policy statement said.