RBI credit policy: 8-point monetary policy snapshot

The RBI announced its monetary policy today. Below is the snapshot of its guidance:

*Slippage in the fiscal deficit has been adding to inflationary pressures. Credible fiscal consolidation, therefore, will be an important factor in shaping the inflation outlook.

*Although abundant liquidity injection by the ECB has mitigated the immediate pressures in financial markets, a credible solution to the sovereign debt problem is yet to emerge. 

*With sluggish exports growth and crude oil prices rising sharply, the current account deficit (CAD) is likely to remain high. Financing of the CAD will continue to pose a challenge so long as the global situation remains uncertain.

*While corporate sales growth in Q3 of 2011-12 was robust, margins moderated, reflecting increasing difficulty in passing on rising input prices.

*Inflation has broadly evolved along the projected trajectory so far but, upside risks to inflation have increased from the recent surge in crude oil prices, fiscal slippage and rupee depreciation.

*There continues to be significant suppressed inflation in fuel, fertilizer and ower as administered prices do not fully reflect the costs of production.

*While most indicators suggest that the economy is slowing down, the performance in Q4 of 2011-12 is expected to be better than that in Q3.

*Recent growth-inflation dynamics indicate that no further tightening is required and that future actions will be towards lowering the rates. However, notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions.