The Reserve Bank of India (RBI) kept key policy rates unchanged in the first quarter review of monetary policy announced Tuesday. Following are the comments from experts on the monetary policy statement .
"This is a bold step from RBI and it certainly needs to be appreciated. With headline inflation persistently remaining above comfort level of 7 per cent, this policy stance of retaining repo rate looks justified despite obvious impact of tight monetary policy for past two years on the growth slowdown. Although SLR is expected to maintain liquidity levels, it may not show any significant impact as the liquidity conditions have been already eased out since the April policy, which included injection of liquidity by way of open market operations."
Senior director, Deloitte in India
"It is disappointing that RBI has chosen not to cut policy rates. Reduction in the SLR does not make any difference in the present scenario as credit growth has not picked up due to higher rates of interest. In fact, by following this path RBI is not taking any constructive steps to either control inflation or stimulate economic growth. It has squarely put the onus of reviving growth with the government. May be it is time we started looking at the paradigm of living with a slightly higher inflation accompanied with higher growth."
Harsh Pati Singhania
President, International Chamber of Commerce India and managing director, JK Paper Ltd
"A cut in policy rates, at this juncture, would have done much to infuse liquidity in the system which is facing tight liquidity conditions, spur investments among corporates and rev up growth momentum in the economy. RBI had sufficient head room to cut interest rates as falling global commodity prices, stable core and manufacturing inflation would ease the pressure on prices. In fact, despite having raised interest rates in the past, inflation has persisted while adversely impacting industrial growth and business sentiment. The need of the hour is administrative actions on the part of the government to ease supply bottlenecks which will help ease inflationary pressure."
Director General, Confederation of Indian Industry (CII)
"The central bank and the government need to coordinate and find a solution to balance the monetary policy, improve the fiscal situation and to get growth back in the economy. The situation in the economy calls for urgent and decisive action and the two primary agencies - RBI and government - responsible for policy making should prepare an effective roadmap together."
President, Federation of Indian Chambers of Commerce and Industry (FICCI)
"Monetary policy will not stimulate growth nor would government policy, now it is for the industry to act and make itself more efficient. From the policy front I feel government will have to keep the social and agricultural aspect in mind, much over the industry. Growth in India is likely to remain low with high inflation something and this is a very uncomfortable situation of stagflation. While the GDP forecast is 6.5 per cent to my mind it would be below 6 per cent mark for current financial year."
Director, KASSA group
"The Reserve Bank of India has kept interest rate unchanged, thereby keeping the cost of funds very high. The industry was expecting downward trend in the interest rate so that cost of manufacturing can be reduced."
Chairman, Apparel Export Promotion Council (AEPC)
"RBI focus is clearly on managing inflation expectations getting retrenched in the economy even against a scenario of falling GDP growth rates. By cutting SLR, it is releasing more money for banks who have SLR at the margin, to lend to the corporate sector. RBI has stated it is ready to do what is required, if government cuts its subsidy burden and reduce supply side bottleneck pressure on the economy."
Head, fixed income, Tata Asset Management Limited
"There is once again disappointment from RBI. There was no change in the rates in previous policy announcement and the real estate sector was expecting a rate cut this time. Both, the developer community and the home buyers are unhappy with results of the policy and this will affect the already disheartened real estate sector. We don't see any positive policies from government which will boost the real estate sector and economy as well. We keep our fingers crossed and hope the next credit policy will bring some cheer to the industry."
Lalit Kumar Jain
Chairman, Kumar Urban Development and president, CREDAI