Accommodative Stance Necessary To Revive Growth, RBI Needs To Be More Hawkish: ASSOCHAM, NAREDCO Chief Dr. Niranjan Hiranandani

The Reserve Bank of India (RBI), in its bi-monthly monetary meet today, has decided to keep the repo rate unchanged. This is the third time in a row the central bank has kept the key rates unchanged. The status quo on monetary policy was expected by most economists, amid high levels of inflation.

The monetary policy committee’s decision to keep key rates unchanged was on expected lines and may continue in the near future to support growth as private consumption has slowly started and several stalled projects have been revived due to the government’s efforts, stated ASSOCHAM and NAREDCO National President, Dr. Niranjan Hiranandani.

The repo rate is kept unchanged at 4 percent and reverse repo rate too stands unchanged at 3.35 percent. The Reserve Bank of India needs to have a hawkish stance while looking at the inflation figures and try to taper it further in order to mitigate the supply-side pressure.

“The proactive stance of the government to tackle the supply side issues would be instrumental in reducing the food prices further. As the numbers show that the economy is recuperating at a quicker pace than anticipated is a very good sign. There are several sectors which are showing an upturn consolidating the fact that the GDP growth numbers would be positive soon,” he added.

Dr. Niranjan Hiranandani
Dr. Niranjan Hiranandani

“Home loans will continue to remain at attractive rates, this should augur well for home buying sentiment,” he added.

“The projected real GDP growth for FY21 at -7.5 per cent vs -9.5 percent projected earlier augurs well for the recovery story. Q3 growth is seen at 0.1 per cent; Q4 at 0.7 per cent bears out the RBI Governor’s statement on business sentiment of manufacturing firms ‘gradually improving’. RBI Governor’s proposal to expand on-tap TLTROs to cover other sectors is a positive move, the important thing he pointed out being that economic constraints have started to ease,” he concluded

Limit for contactless card transactions to be raised from Rs. 2,000 to Rs. 5,000 per transaction from January and the announcement to make the RTGS system operational round the clock is a welcome step, Dr. Hiranandani said.

The RBI announced that after the dismal 23.9 percent contraction in the April-June quarter, the economy has recovered with the July –September quarter contracting to 7.5 percent. The industry is anticipating the Jan-March quarter to be positive, he said.

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