India Inc. Welcomes RBI's Decision To Keep Policy Rates Unchanged

"As we witness the second wave of Covid-19 and its implications on the economic growth and inflation, the decision to hold the accommodative stance and keep the repo rate at 4% was anticipated.  A strong vaccination and distribution programme will gradually churn the wheels of business growth and economic revival," said Mr. Palve.

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New Delhi: India Inc. on Wednesday welcomed the Reserve Bank of India's (RBI's) decision to maintain the 'status quo' on the key policy rates to cushion the economy in the light of the pandemic resurgence.

Mr. Sanjay Palve, Senior Managing Director, Essar Capital Ltd, believes that the country's economic recovery is still fragile, and as the external demand continues to be uncertain, RBI's continuous support, proactive and balanced approach is what is needed to ensure liquidity.

"As we witness the second wave of Covid-19 and its implications on the economic growth and inflation, the decision to hold the accommodative stance and keep the repo rate at 4% was anticipated.  A strong vaccination and distribution programme will gradually churn the wheels of business growth and economic revival," said Mr. Palve.
 
Dr. Samantak Das, Chief Economist and Head of Research & REIS, JLL India, feels that the resurgence of the pandemic and resultant concerns of its impact on the economy and businesses demanded a resilient approach.

"The central bank has responded by taking an accommodative stance, kept the repo rates unchanged. The health of the economy has now become more contingent towards the progress of vaccination and control of the pandemic. In such a scenario, holding the repo rates at 4% is likely to cushion the impact on the economy due to intermittent and regional lockdowns. The government's decision to retain the inflation target of 4% with a tolerance band of +/- 2 percentage points for the coming five years provides continuity to the stance of the monetary policy committee," said Mr. Das.

According to Mr. Abheek Barua, Chief Economist, HDFC Bank, the RBI policy was more dovish than expected, with the central bank recognizing the risks associated with the rising infection cases in the county and continuing its support for growth through several measures, including its commitment to keep liquidity in surplus and an extension of measures like the on-tap TLTRO.

"Fears of any pre-mature tightening either through rates or liquidity management by some sections of the market have been put to rest by RBI's dovish tone today. For instance, the governor was categorical that the changes in liquidity measures announced today do not constitute tightening," said Mr. Barua.

Mihir Vora, Director & Chief Investment Officer, Max Life Insurance, welcoming the RBI's decision, said, "A positive reinforcement of RBI's commitment to support growth and combat the COVID crisis. The policy announcement has an outright dovish pause with the commitment of an accommodative stance till growth recovery is secured. All 6 members voted for the unchanged policy rate and stance. Measures announced today are intended to lower borrowing costs, ease financial conditions, and to keep liquidity supportive for credit offtake. The announcement ebbed worries of any early liquidity withdrawal."
 
Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services, said that the MPC expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity. "Guidance has become more open-ended and state-based amid new uncertainties and evolving nature of the economy, stating policy stance will remain accommodative till growth recovers sustainably," she said.