The Reserve Bank of India, on Friday, while keeping the key lending rates unchanged revised its growth projection for the country’s real gross domestic product (GDP) to -7.5% for FY2021 from -9.5%. Here is what leaders of India Inc. and chief economists have to say about RBI’s decision to spur growth.
Mr. Chandrajit Banerjee, Director General, CII: “The upward revision in RBI’s GDP growth expectation to -7.5% as compared to the -9.5% it had forecasted earlier is encouraging. CII has been observing a gradual recovery seeping in over the last few months, and the industry is optimistic that this growth momentum will continue going forward as well.”
Mr. Sanjay Palve, MD, Finance, Essar Capital Ltd: “The RBI governor has hinted towards green shoots of economic recovery with improved projections in GDP growth. The unchanged repo rate indicates the accommodative stance of the central bank as all efforts are being made to revive growth in the economy.”
Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India: “RBI’s accommodative stance in the last few months has kick-started the economy that had experienced a sudden contraction due to the pandemic. These measures have ensured both – demand stimulation and liquidity in the economy, achieved by keeping the short term borrowing rates well below the benchmark.”
Mr. Rajiv Agarwal, MD& CEO, Essar Ports Ltd: “We appreciate RBI’s efforts to maintain an accommodative stance. The unchanged Repo rate is understandable despite a spurt in inflation, which has been primarily driven by disruptions in the supply chain, excessive margins, and indirect taxes.”
Mr. Krish Raveshia, CEO of Azlo Realty: “The RBI keeping key rates unchanged is on expected lines as inflation has been way above the RBI mandated level. The policy stance kept unchanged at Accommodative indicates further rate easing in the near future. The announcement by RBI to keep system liquidity in surplus to help growth is a big positive.”
Dr. Poonam Tandon, CIO, IndiaFirst Life Insurance Company Limited: “The RBI kept the policy rates unchanged given the growth-inflation dynamics with an accommodative stance. The focus is to revive growth and spur economic activity, which has been disrupted by the Covid19 pandemic while ensuring inflation remains within the targeted range.”
Mr. Deepak Sood, ASSOCHAM Secretary-General: “Given the inflationary challenges, it is no surprise that the RBI-MPC has kept the policy repo rate unchanged at four percent. However, we must applaud the MPC for staying on course with regard to the accommodative interest rate stance. What is more, Governor Mr. Shaktikanta Das has laid a lot of emphasis on the fact that economic recovery would be dependent on sustained policy support.”
Mr. Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani: “The RBI’s decision of keeping the repo rate unchanged was on expected lines owing to the rise in inflation in recent months. Even though the apex bank has kept rates unchanged, we still believe that there is room for financial institutions to cut down on their lending rates.”
Mr. Ravi Singhal, Vice Chairman, GCL Securities Limited: “The RBI’s accommodative stance to stay the repo rate unchanged is in line with what most folks within the industry were expecting. The governing agencies got to contain near-term financial risks within the face of rising inflation. CPI has reached 6.8% in Q3 FY 20, which is an alarming sign. In Q4, although it’s expected to ease bent 5.8%, it’s still not a healthy number.”
RBI has announced to increase the transaction limit of contactless cards to Rs 5,000.
Vikas Saraogi, Vice President, Merchant Acceptance, South Asia, Mastercard: “In the last few months, there has been an exponential growth in contactless digital payments. This is because consumers are increasingly choosing to pay in a safe and hygienic way for their day to day needs. Mastercard welcomes the RBI’s decision to increase the limit from Rs. 2000 to Rs. 5000 without entering a PIN on contactless transactions through NFC cards.”
What did the economists say?
Dr. Aurodeep Nandi, India Economist, Vice President, Nomura: “The RBI resisted blinking despite the high inflation glare. There were two insecurities that the market had in the run-up the policy meeting – one, whether the higher-than-expected inflation and growth data would trigger a rethink on the existing ‘lower-for-longer’ guidance on policy rates; and two, whether the RBI would look to temper the surge in liquidity to re-align money market rates with the policy corridor. On both, the RBI has essentially doubled down on its October accommodative guidance and asserted that inflation remains largely supply-side driven and that supporting growth remains its paramount priority.”
Mr. Abheek Barua, Chief Economist, HDFC Bank: “The RBI kept its policy rate unchanged at 4%, as expected, and continued to keep its policy stance accommodative. Some sections of the market had anticipated the central bank to act on the rising surplus liquidity in the system in light of the increasing inflationary pressures. However, the absence of any major liquidity absorption measures in the midst of a prolonged inflationary episode and indeed the upward revision of both the RBI’s growth and inflation forecasts might be somewhat puzzling.”
Prithviraj Srinivas, chief economist, Axis Capital: “The RBI kept policy rates on hold and its accommodative stance + guidance unchanged as expected. This despite an upward revision to growth and inflation forecasts. The MPC has unanimously voted to keep markets calm, given the uncertain outlook. However, the governor noted in his statement that there is a small window to proactively manage supply-side disruptions and break the inflation spiral, which is fuelled by excessive margins and indirect taxes.”