A quick read of the RBI credit policy

Moneycontrol BureauThe Reserve Bank of India today slashed repo rate—the rate at which it lends funds to banks—by 25 basis points. The central bank said the stance of the monetary policy would continue to be 'accomodative', hinting more cuts were likely in future depending on macroeconomic conditions.Following are the highlights of the credit policy:* Downside risks to recovery in some advanced economies have eased; majoremerging market economies grappling with weak growth. World trade remains subdued.* The uneasy calm in financial markets could be dispelled easily by a sudden return of risk-off investor sentiment on incoming data, especially pertaining to China or to US inflation* Despite acutely low reservoir levels and a deficient north-east monsoon, rabi foodgrains production increased over its level a year ago – mainly in wheat and pulses* Food inflation eased for the first time in the second half of 2015-16. Notably, this occurred on a decline in prices rather than favourable base effects* Value added in industry accelerated in October-March, led by manufacturing which benefited from the sustained softness in input costs* Consumer non-durables production has been shrinking, with a pronounced decline in Q4. This reflects the continuing slack in rural demand.* Consumer durables remained strong, even after abstracting from favourable base effects, which suggests that urban demand is holding up* Services sector activity expanded steadily through the year, with trade, hotels, transport, communication and public administration, defence and related services turning out to be the main drivers in H2. * Construction sector overburdened by unsold inventory of homes, although strong demand from IT and IT-enabled services boosting commercial real estate. Road construction has accelerated.* CPI inflation excluding food and fuel edged up in February, mainly under housing, education, personal care and transport and communication, suggesting capacity constraints in the services sector.* Exports declined in February in US dollar terms for the fifteenth successive month, but the rate of contraction narrowed to a single digit for the first time in this period and volume growth turned positive* Uneven recovery in 2015-16 growth likely to strengthen gradually into 2016-17, assuming a normal monsoon, likely boost to consumption demand from 7th Pay Commission recommendations and OROP, and low interest rates. * GDP growth projection for 2016-17 retained at 7.6 per cent, with risks evenly balanced around it