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Industry, market-watchers and economists welcome RBI's monetary policy

Industry, market-watchers and economists welcome RBI's monetary policy

New Delhi, Dec 8 (UNI) With Reserve Bank of India (RBI) continuing the low-interest regime by holding on key rates and maintaining accommodative stance, industry and policy watchers welcomed the bi-monthly monetary policy saying it is on expected lines and aimed at supporting economic recovery.

"The accommodative policy stance at this juncture would not only pave the way for a double digit GDP growth in the current year 2021-22, but will also help in creating a strong, sustainable and vibrant economy going forward, said Pradeep Multani, President at industry chamber PHDCCI.

The six-member Monetary Policy Committee (MPC) on Wednesday voted unanimously to maintain status quo with regard to the policy repo rate and by a majority of 5 to 1 to retain the accommodative policy stance.

"Consequently, the policy repo rate remains unchanged at 4% and the stance remains accommodative as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID19 on the economy, while ensuring that inflation remains within the target going forward," RBI Governor Shaktikanta Das said after the 3-day MPC meet.

The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25%. The reverse repo rate also remains unchanged at 3.35%, he added.

Das heads the key panel which is primarily tasked with maintaining price stability in the country and helping formulate the monetary policy.

Commenting on the monetary policy review, Icra Chief Economist Aditi Nayar said that RBI decision to hold rates and retain accommodative stance is in line with the expectations and necessitated by the renewed uncertainty fuelled by the Omicron variant.

"While a subtle shift has been brought in with the comment that price stability remains the cardinal principle of monetary policy, the overarching tone of today's statement and forward guidance is less hawkish than what we had anticipated," she said referring to RBI Governor's statement.

Madhavi Arora, Lead Economist, Emkay Global Financial Services said that MPC had expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity.

"As expected, the RBI did not opt for a reverse repo hike, and the policy is well used as a lever to prepare markets for a gradualist approach toward normalization through both communication and action," she said.

Arora expects RBI to opt for gradual transition.

Rashmi Saluja, Executive Chairperson of Religare Enterprises said that the central bank was expected to maintain status quo and wait for a better time to calibrate benchmark interest rate to step up growth.

"Despite concerns around Omicron virus, India’s economy has pulled itself out of a contraction and is now very well placed to deal with Covid. An unchanged repo rate also augurs well for home buyers and MSME borrowers who can continue to benefit from the low interest rate regime. Such steps along with government’s focus on providing easy credit to the MSME sector, which is among the key contributors to India’s economic activity, will be important towards stepping up growth." she noted.

In his monetary policy statement, RBI Governor said that downside risks to the growth outlook had risen with the emergence of Omicron and renewed surges of COVID-19 infections in a number of countries.

Sounding a note of caution, Das said that headwinds continue to be posed by elevated international energy and commodity prices, potential volatility in global financial markets due to a faster normalisation of monetary policy in advanced economies, and prolonged global supply bottlenecks.

'We completely agree with the statement of Governor Mr Shaktikanta Das that even as the economic recovery has been regaining traction, it is not yet strong enough to be self-sustaining and durable.

Hence, continuing monetary policy support to the growth momentum is of utmost importance, especially when there are signs of pick-up in private investment,' Assocham Secretary General Deepak Sood said.

Investors seemed to be endorsing the RBI's decision to hold status quo as both BSE and NSE saw upward movement.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities said that RBI's decision to keep the policy rate unchanged and maintaining an accommodative stance helped benchmark indices propel sharply for the second straight session.

"Post reversal, the market has maintained an uptrend continuation formation, and on daily charts it has formed a bullish candle. The texture of the market is positive and is likely to continue in the near term," he said.


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