"RBI has surprised markets by reducing repo rate"

"Though monetary policy stance changed from ‘calibrated tightening’ to ‘neutral’ in line with expectations, RBI has surprised markets by reducing the policy repo rate by 0.25 per cent, indicating a slight tilt towards supporting economic growth," said Venkatraman G S, CFO, Subex.

Reserve Bank of India (RBI), in its sixth bi-monthly monetary policy statement for 2018-19, slashed repo rate by 25 basis points. The unexpected rate cut move left market experts and financial leaders in a complete surprise. 
 
"Though monetary policy stance changed from ‘calibrated tightening’ to ‘neutral’ in line with expectations, RBI has surprised markets by reducing the policy repo rate by 0.25 per cent, indicating a slight tilt towards supporting economic growth," said Venkatraman G S, CFO, Subex. 
 
He says India’s estimated real GDP growth rate at 7.2 per cent for 2018-19 "is pretty decent given the low overall world economic growth".
 
As per RBI, the path of inflation has moved downwards significantly, and over the period of the next one year, headline inflation is expected to remain contained below or at the target of 4 per cent.
 
"With headline inflation remaining well below RBI’s medium-term target of 4 per cent, on account of significant undershooting in food inflation, and the benign outlook in the near term, we believe the softening of stance is in the right direction," observed Crisil in policy review.
 
"Some risks to inflation can emerge from consumption focused expansionary fiscal policy, sticky core inflation, and normalisation of food inflation (currently negative) which could gain speed if monsoons are sub-normal. Moderate upturn in global food prices and efforts to raise farm incomes can put upward pressure on inflation," said rating agency. 
 
The year-on-year growth in core industries decelerated to 2.6 per cent in December, which is "another case for creating environment for assisting industrial growth", said Subex CFO.
 
As per Venkatraman, currency in circulation expanded sharply during December and January, which could aid in pushing up inflation in an election year.
 
He welcomed the proposal to relax the end-use restrictions under the approval route of the ECB framework for resolution applicants under the CIRP and allowing them to utilise the ECB proceeds for repayment of rupee term loans of the target company.
 
Limit for collateral–free agriculture loans proposed to increase from ₹1 lakh to ₹1.6 lakh will help small farmers, he opined.

Add new comment