India Inc today said the RBI’s decision to keep policy rates unchanged was on expected lines, even as it hoped the central bank would soon cut interest to boost demand and spur investments in the country.
“While the Reserve Bank of India has maintained status quo in current monetary policy statement, we hope that it will soon consider a cut in policy rate and give a further boost to demand and investments,” Ficci President Rashesh Shah said.
He said while the economy is seeing signs of recovery, support is needed from all quarters to translate this into a firm recovery, adding that this was critical for pushing investments, growth and job creation.
Shah said the inflation and growth projections for 2018-19 do provide optimism for a rate cut in forthcoming monetary policy decisions.
Assocham President Sandeep Jajodia said, “The RBI has rightly flagged certain issues like the impact of MSP (minimum support price) revision on the prices and possible fiscal slippages at both the Centre and the states.”
The RBI’s macro numbers like inflation forecasts as also the GDP look real and variables like Monsoon, crude oil prices in an election year would be the factors to watch for, he added.
The Assocham chief said RBI Governor Urjit Patel has highlighted the unfolding risks from trade protectionism.
“Those who thought the threat of a trade war was not real may be in for a surprise as is evident from the retaliatory measures by China on imposing tariff on imports from the US, though there are talks of negotiations,” he said.
Engineering exporters’ body EEPC India Chairman Ravi Sehgal said, “While RBI’s decision to keep the interest rates unchanged was largely expected, given the concerns on inflation, exporters are finding it tough to compete in the global market, faced with high cost of borrowing along with increasing prices of raw material like steel.”
The Reserve Bank today stuck to the widely expected status quo in key rates citing uncertainties over inflation, which may be fuelled by rising crude oil prices, fiscal slippages and higher prices of foodgrain.
“Though we welcome the status quo, there is possibility for a 25 basis points cut in repo rate as inflation is hovering in the comfortable trajectory,” PHD Chamber of Commerce President Anil Khaitan said.
Going ahead, we look forward to the softer stance of monetary policy by RBI keeping in view the present comfortable inflationary scenario, he added.
The Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel expects the growth rate to accelerate to 7.4 percent in 2018-19, up from 6.6 percent last fiscal, ended March 31, mainly on account of revival of investment activity.
With regard to prices, the MPC lowered retail inflation target for the first half of current fiscal to 4.7-5.1 percent on sharp moderation in food price rise.
Five members of the panel, including the RBI Governor, voted for a status quo while executive director Michael Patra was the lone member who wanted the key rate to be hiked by 25 basis points.moneycontrol