New Delhi, (UNI) Noting that low-interest regime is needed to support economic recovery, industry captains and policy-watchers on Thursday hailed Reserve Bank of India (RBI) for keeping the policy repo rate unchanged at 4 per cent and maintaining accommodative stance to boost growth.
They also said that decisions of the Monetary Policy Committee (MPC) are on expected lines.
“The MPC expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity, “said Madhavi Arora, Lead Economist, Emkay Global Financial Services.
“However, Prof Jayanth Varma’s dissent on continuation of accommodative stance for foreseeable future continues to keep MPC in split state. The possible hike in fixed reverse repo was a close call and it seems the RBI gauged that markets need to be assuaged over material tightening of financial conditions ahead as global dynamics change and decided to stay put,” she further said.
Based on the current macro economic situation and outlook, the rate-setting panel led by Governor Shaktikanta Das unanimously decided to keep the key policy repo rate unchanged.
The MPC also decided by a majority of 5 to 1 to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid 19 on the economy while ensuring that inflation remains within the target going forward.
“Policy rates remaining unchanged indicate that RBI is more focused on domestic macro variables rather than tracking global central bank actions. While the US Fed has clearly indicated multiple rate hikes going forward to combat rising inflation, the RBI seems far more calibrated in approach given its own projection of domestic CPI peaking in Q4FY22 and moderating in FY23,” said Nitin Shanbhag, Executive Group Vice President – Investment Products, Motilal Oswal Private Wealth.
The central bank has retained inflation estimate for 2021-22 at 5.3 per cent, with Q4 at 5.7 per cent on account of unfavourable base effects that ease subsequently.
The RBI expects CPI inflation for 2022-23 to be at 4.5 per cent with first quarter inflation seen at 4.9 per cent, second quarter at 5 per cent, third quarter at 4 per cent and fourth quarter at 4.2 per cent with risks broadly balanced.
The RBI has projected the economic growth for financial year 2022-23 at 7.8 per cent.
“RBI’s announcement to continue with its accommodative stance is a welcome move to revive and sustain growth and limit any disruption to economic activity. It is a clear signal that regulator has chosen growth over any other factor like inflation or even aggressive stance taken by global central bankers and policy makers. The Indian economy has weathered Covid pandemic well and it will continue to be the fastest-growing economy in coming future,” said Dhaval Ajmera, Director, Ajmera Realty & Infra India.
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd said that RBI’s decision to keep the repo rate at 4 per cent is a step forward on the road to economic recovery.
“The government has recognized the evident necessity to be the driving force behind economic recovery, and only then will the private sector contribute to this recovery by allocating capital to grow,” Poddar said.
