RBI governor Raghuram Rajan
RBI governor Raghuram RajanReuters

The first bi-monthly monetary policy review meeting of the Reserve Bank of  India (RBI) for the year 2016-2017 held Tuesday in India's financial capital Mumbai was not just about interest rate cut or addressing concerns over liquidity.

A disappointed Dalal Street (where the Bombay Stock Exchange is located) might have given thumbs down to the 25 basis point rate cut, with the benchmark indices Sensex and Nifty shedding over 2 percent each, but there was much more to the Tuesday meeting than meets the eye.  

RBI governor Raghuram Rajan dwelt upon many issues concerning the global economy, besides India. Here we bring you the highlights of Rajan's statement covering advanced and emerging economies.

Overall global activity

Since the sixth bi-monthly statement of February 2016, global economic activity has been quiescent. Perceptions of downside risks to recovery in some advanced economies (AEs) at the beginning of 2016 have eased, while major emerging market economies (EMEs) continue to contend with weak growth and still elevated inflation amidst tighter financial conditions.

Global trade

World trade remains subdued due to falling import demand from EMEs and stress in mining and extractive industries.

U.S. economy

In the U.S., consumer spending was underpinned by a strengthening labour market, but flagging exports proved to be a drag on growth in the fourth quarter (Q4) and cloud the near-term outlook.

Euro Zone

In the Euro area, tailwinds in the form of aggressive monetary policy accommodation and still low energy prices have supported activity in an environment beset with uncertainties from the migrant crisis, intensifying stress in the banking sector, and possible Brexit.


While Japan escaped recession in Q4 of 2015, a combination of weak consumer spending, business investment and exports has slowed the economy in the first quarter (Q1) of 2016.


In China, sluggish industrial production, contracting exports, capital outflows and substantial excess capacity in factories and the property market remain formidable headwinds, notwithstanding significant monetary and fiscal policy stimulus.

Global stock markets

Global financial markets have recouped the losses suffered in the turbulence at the beginning of the year. From mid-February, a firming up of crude prices buoyed market sentiment, allaying fears of global recessionary risks.

On the yellow metal 

Gold prices have jumped 16 percent in Q1 of 2016 on safe haven demand.

Commodity prices

Commodity prices, including oil, have picked up recently, though they still remain soft.