MPC DECISION TO GIVE A FILLIP TO GROWTH: EXPERTS

Press Trust of India

Financial sector participants on Friday said RBI’s decision to keep the key repo rate unchanged is an accommodative approach to manage inflation while keeping growth as target, amid the current economic conditions.

The Monetary Policy Committee (MPC) evaluated domestic and global macroeconomic and financial conditions and voted unanimously to leave the policy repo rate unchanged at 4%, RBI governor Shaktikanta Das said in his policy statement for the bi-monthly monetary policy review.

“It also decided to continue with the accommodative stance of monetary policy as long as necessary—at least during the current financial year and into the next year—to revive growth on a durable basis and mitigate the impact of Covid-19, while ensuring that inflation remains within the target going forward,” Das said. Friday’s monetary policy was as aggressively accommodative as possible without cutting the policy rate, said Abheek Barua, chief economist, HDFC Bank.

“Given the stance, there is a significant probability of a rate cut in February, if not in December itself as inflation, as we expect, moderates. Has the RBI gone overboard in its effort to support growth? We think not. These are unprecedented times and the Indian economy’s revival efforts are hobbled by the lack of adequate fiscal support. If monetary policy does have to do the heavy lifting, it cannot do it within the confines of a conventional take-no-risks framework,” Barua said.

Siddhartha Sanyal, chief economist and Head—research, Bandhan Bank said the RBI has strongly conveyed their commitment to support growth recovery, even when the MPC’s hands were virtually tied in the policy as regards the policy rates.

The Reserve Bank in its policy statement said it is ready to conduct market operations to assuage pressures arising out of it and dispel any illiquidity in financial markets.

“The monetary policy announcement is overall positive and growth oriented. The RBI governor has rightly mentioned that focus must be on reviving the economy. Accordingly, the accommodative stance was as expected. The RBI’s assurance on maintaining comfortable liquidity conditions will assure the markets, at the same time enable the government to go ahead with its borrowing programme smoothly,” said Padmaja Chunduru, MD & CEO, Indian Bank.