RBI liquidity and growth support measures crucial for recovery from second wave of COVID: experts
The RBI in its monetary policy on Friday kept interest rates unchanged at record levels and pledged to maintain an accommodative policy to support growth.
However, it reduced its growth projection for the current year to 9.5 percent from 10.5 percent earlier. He fixed retail price inflation at 5.1% in 2021-2022, with upside risks associated with rising commodity prices and the re-emergence of higher supply constraints in the middle of the market. current blocking phase.
ICRIER RBI Chair Professor in Macroeconomics Alok Sheel said as expected that the RBI’s Monetary Policy Committee (MPC) has decided to keep policy rates on hold, while declaring its intention to continue injecting more. liquidity in the financial markets, in particular by buying public debt.
“With the continued accumulation of bad debt obstructing the transmission channels of monetary policy, fiscal policy remains by far the most effective game to get the economy back on track,” Sheel added.
Amit Goyal, CEO of India Sotheby’s International Realty, said for the housing market it is very positive that the repo rate has remained unchanged despite the fact that retail price inflation has remained high.
“From a homebuyer’s perspective, this effectively means that interest rates on loans will continue to stay at historically low levels. We believe RBI’s goal of maintaining liquidity and supporting economic growth in the countries thanks to lower interest rates will be crucial for recovery from the second wave of the pandemic, ”Goyal added.
Anarock Property Consultants chairman Anuj Puri said if it hadn’t been for the pandemic, RBI would definitely have taken a different stance on benchmark rates.
“It’s certainly positive for mortgage borrowers, as floating retail lending rates were at their lowest for the past two decades. The pursuit of this low interest rate scheme works very well for all borrowers as the high affordability environment is likely. to go on for a bit, “Puri added.
Financial intelligence firm Moody’s Analytics said COVID-induced restrictions should only be eased gradually, with a sharp slowdown in domestic demand expected to weaken the recovery beyond the June quarter.
“The RBI is expected to maintain an accommodative stance over the next two quarters despite transient inflationary pressures, while broadening liquidity measures to support the recovery,” he added.
ICRA Chief Economist Aditi Nayar said the MPC is firmly committed to fostering a sustainable recovery in growth and the ICRA expects it will show great tolerance for inflation to average. of the CPI is between 5 and 6% during the recovery period.
“While the MPC’s real GDP growth projection of 9.5% is in line with the high end of our own forecast range of 8-9.5%, we believe vaccine availability accelerated, resulting in an increase of domestic consumption demand, is at the heart of this result.
“Such a resurgence in demand, however, may be inconsistent with an average CPI inflation of 5.1% in FY2022, unless fuel taxes are significantly reduced,” Nayar added. .
Essar Capital Senior Managing Director Sanjay Palve said RBI’s move is likely to help the government’s fiscal efforts to spur economic recovery.
Suman Chowdhury, director of analysis at Acuity Ratings & Research, said the Reserve Bank has taken note of upside risks to inflation in a scenario of rising commodity prices and re-emerging supply constraints higher in a context of stalemate, but continues to project benign inflationary figures for the next quarters.
“In a way, this confirms our expectation that the return of growth impulses is the main objective of monetary policy in the short and medium term,” he added.
HDFC Bank chief economist Abheek Barua said the RBI’s decision to provide liquidity support to contact-intensive sectors is likely to help credit flows to those sectors.
“That said, a more equitable allocation of credit will likely depend on whether the risk assessment complies with the reverse repo spread provided by the RBI to banks. Therefore, some form of credit guarantees may be necessary. be necessary to risk the system, ”added Barua.
Muthoot Finance Managing Director George Alexander Muthoot said that a separate liquidity window of Rs 15,000 crore for certain contact-intensive sectors and the doubling of the exposure threshold to Rs 50 crore for MSMEs , small businesses and individuals for business lending purposes under Resolution 2.0 will help borrowers in this COVID crisis.
J Sagar Associates’ partner Anish Mashruwala said the RBI has consciously taken into account the need to ensure an equal distribution of credit and liquidity to particularly affected sectors.
These measures are all welcome to support the overall growth of the Indian economy, he added.
Bandhan Bank chief economist Siddhartha Sanyal said the RBI has been proactive in using conventional and unconventional monetary policy tools over the past 15 months to shield the economy from the effects of the pandemic.
“In politics today, the RBI’s tendency to continue to expand the same was evident from initiatives such as liquidity support to contact-intensive sectors and to MSMEs and small businesses,” Sanyal said.
N Sivaraman, Group Managing Director and CEO, ICRA welcomed the provision of on-demand liquidity for contact-intensive industries, additional funds for SIDBI and improved exposure levels for Resolution Framework 2.0.
Radhika Rao, economist and senior vice president of DBS Singapore, said the central bank’s priorities “go beyond the policy rate.”
Nilaya Varma, CEO of Primus Partners, said: “Record foreign exchange reserves of nearly $ 600 billion provide both the RBI and to some extent the government as well to drive growth. place for private investment by providing the necessary impetus. PTI JD KPM
Warning :- This story has not been edited by Outlook staff and is auto-generated from news agency feeds. Source: PTI