Low interest rates to boost business confidence: Industry welcomes RBI’s monetary policy – Times of India
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NEW DELHI: The Reserve Bank of India‘s (RBI) decision to keep repo rate unchanged for the seventh time in a row has been hailed by industry and experts alike.
The six-member Monetary Policy Committee (MPC) of the Reserve Bank in its latest policy decision kept the key repo rate unchanged for the time at 4 per cent, with an accommodative stance, primarily to support growth in the wake of the pandemic impact.
Experts believe that the decision is in line with the unfinished agenda of supporting India’s economic growth worsened by the second Covid wave.
“We welcome the MPC’s continued support to nurturing the as-yet-incomplete growth revival, as the drivers of elevated inflation simply do not stem from surging domestic demand,” N Sivaraman, managing director and group CEO of ICRA said.
“While the MPC will likely strive to support growth for as long as possible, it will be averse to allowing inflation expectations from unhinging. Therefore we believe policy normalisation is likely to commence in Q4 FY2022, once increased vaccinations visibly drive up domestic demand,” he added.
Praising the decision, State Bank of India (SBI) chairman Dinesh Khara termed the move as a pragmatic one which strikes a fine balance between “stance and strategy”.
“While the policy stance continues to be accommodative to continuously support growth, a strategy of careful recalibration of liquidity management is clearly indicated with the roll out of VRRR (variable rate reverse repo),” Khara told news agency PTI.
Foreign lender Standard Chartered Bank’s Zarin Daruwala also told PTI that the RBI view was “pragmatic”, given the higher inflation prints and the ample system liquidity.
Meanwhile, India Inc said that low interest rates will give a boost to business and consumer confidence.
“Continuation of an accommodative stance to revive and sustain the economic growth trajectory amid the impact of Covid-19 will boost the confidence of business and consumers. It is encouraging that RBI has retained the projection for GDP growth at 9.5 per cent for FY2022 in the difficult time caused by the pandemic,” PHDCCI president Sanjay Aggarwal told PTI.
In a statement, Assocham said that full credit must be given to the RBI for prioritising growth and retaining the accommodative stance on policy rates.
“Its expectations that inflation should moderate from the third quarter of the current fiscal year are realistic as various supply-side issues would be resolved by then. Besides, with the monsoon picking up pace, a positive impact on food inflation should be seen.”
By keeping the low-interest rate regime in place with an unchanged repo rate of four per cent, the RBI and the government have been on the same page for lending full support to the nascent growth, it added.
Similarly, the real estate industry welcomed the RBI’s decision and said that low interest rates will boost home buying sentiment and drive demand especially during the upcoming festival season.
However, builders also demanded that steps should be taken to enhance liquidity in the real estate sector.
Naredco president Niranjan Hiranandani told PTI that low interest rate will augment the home buying sentiment and facilitate financial cushion to log the deals in backdrop of festive tailwinds.
“Also, if regulators can enhance credit supply to the stalled projects via permitting more SWAMIH funds; will go a long way in resurrecting the prolonged sluggish real estate market and ensure customer delivery,” he added.
(With inputs from PTI)
The six-member Monetary Policy Committee (MPC) of the Reserve Bank in its latest policy decision kept the key repo rate unchanged for the time at 4 per cent, with an accommodative stance, primarily to support growth in the wake of the pandemic impact.
Experts believe that the decision is in line with the unfinished agenda of supporting India’s economic growth worsened by the second Covid wave.
“We welcome the MPC’s continued support to nurturing the as-yet-incomplete growth revival, as the drivers of elevated inflation simply do not stem from surging domestic demand,” N Sivaraman, managing director and group CEO of ICRA said.
“While the MPC will likely strive to support growth for as long as possible, it will be averse to allowing inflation expectations from unhinging. Therefore we believe policy normalisation is likely to commence in Q4 FY2022, once increased vaccinations visibly drive up domestic demand,” he added.
Praising the decision, State Bank of India (SBI) chairman Dinesh Khara termed the move as a pragmatic one which strikes a fine balance between “stance and strategy”.
“While the policy stance continues to be accommodative to continuously support growth, a strategy of careful recalibration of liquidity management is clearly indicated with the roll out of VRRR (variable rate reverse repo),” Khara told news agency PTI.
Foreign lender Standard Chartered Bank’s Zarin Daruwala also told PTI that the RBI view was “pragmatic”, given the higher inflation prints and the ample system liquidity.
Meanwhile, India Inc said that low interest rates will give a boost to business and consumer confidence.
“Continuation of an accommodative stance to revive and sustain the economic growth trajectory amid the impact of Covid-19 will boost the confidence of business and consumers. It is encouraging that RBI has retained the projection for GDP growth at 9.5 per cent for FY2022 in the difficult time caused by the pandemic,” PHDCCI president Sanjay Aggarwal told PTI.
In a statement, Assocham said that full credit must be given to the RBI for prioritising growth and retaining the accommodative stance on policy rates.
“Its expectations that inflation should moderate from the third quarter of the current fiscal year are realistic as various supply-side issues would be resolved by then. Besides, with the monsoon picking up pace, a positive impact on food inflation should be seen.”
By keeping the low-interest rate regime in place with an unchanged repo rate of four per cent, the RBI and the government have been on the same page for lending full support to the nascent growth, it added.
Similarly, the real estate industry welcomed the RBI’s decision and said that low interest rates will boost home buying sentiment and drive demand especially during the upcoming festival season.
However, builders also demanded that steps should be taken to enhance liquidity in the real estate sector.
Naredco president Niranjan Hiranandani told PTI that low interest rate will augment the home buying sentiment and facilitate financial cushion to log the deals in backdrop of festive tailwinds.
“Also, if regulators can enhance credit supply to the stalled projects via permitting more SWAMIH funds; will go a long way in resurrecting the prolonged sluggish real estate market and ensure customer delivery,” he added.
(With inputs from PTI)
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