Mumbai 11 : Although in the first policy review of the current financial year, the central bank kept key rates unchanged and maintained an accommodative stance, there is a clear shift in focus and the rate hike may start in August, experts and industry leaders said.
Shaktikanta Das has maintained the policy stance loose since taking over as RBI Governor. Former Finance Ministry top bureaucrat Das was appointed RBI Governor in December 2018. Even before the Covid pandemic hit, Das opted for a loose monetary policy stance to support growth.
In May 2020, he cut the key policy rates to a record low to support the economy hit by lockdowns and the pandemic. On Friday, Das-led six-member Monetary Policy Committee (MPC) voted unanimously to keep the policy repo rate unchanged at 4 per cent and maintain an accommodative stance.
The continuation of Reserve Bank of India’s accommodative stance is welcome. The statement does allude to a withdrawal of accommodation clearly signaling towards normalisation of liquidity management to ensure inflation remains within target,” said Sanjiv Mehta, President of industry body FICCI.
“There has been a considerable change in the economic scenario since the last policy announcement and we were expecting that the Central Bank will take due cognizance of the current situation. The significant escalation in geo-political stress since end February 2022 is undermining global recovery and some impact on India will be inevitable, added Mehta, who is also the Chairman and Managing Director of Hindustan Unilever Limited.
The best thing about the Credit Policy review by the MPC is that the RBI is continuously trying various monetary tools to face the unfolding global challenges of elevated commodity and crude prices to limit the inflationary impact on the Indian economy without giving any jerk to a growth trajectory, said ASSOCHAM Secretary General Deepak Sood. Pradeep Multani, President, PHD Chamber of Commerce and Industry, said the accommodative stance by the RBI would strengthen and support the business and consumer sentiments as well as the economic recovery.
RBI’s decision to keep the policy repo rate unchanged and maintain an accommodative stance is a big positive for the economy which is now facing some headwinds from ongoing geo-political tensions, said Mahesh Desai, Chairman, EEPC India. At a time the industry is witnessing recovery after two years of stress caused by Covid pandemic, the RBI’s move would ensure further credit support and spur the growth momentum. Despite mounting inflationary pressure, the RBI has shown its commitment to push growth said Desai.
Inflation has emerged as a big headache for the RBI. The central bank has sharply increased its forecast for inflation for the current financial year to 5.7 per cent from its earlier projection of 4.5 per cent announced in February. While the inflation projection has been revised upward, the economic growth forecast has been sharply lowered. The RBI has lowered GDP growth projection for 2022-23 to 7.2 per cent from its earlier projection of 7.8 per cent.