Moneycontrol
Dec 07, 2016 03:24 PM IST | Source: Reuters

Experts View on RBI's policy rate unchanged

The Reserve Bank of India (RBI) unexpectedly kept its policy repo rate unchanged at 6.25 percent on Wednesday, despite calls for action as an intense cash shortage threatens to slam the brakes on the world's fastest growing major economy.


The Reserve Bank of India (RBI) unexpectedly kept its policy repo rate unchanged at 6.25 percent on Wednesday, despite calls for action as an intense cash shortage threatens to slam the brakes on the world's fastest growing major economy.


Here are some initial reactions to the decision.


COMMENTARY:

Samrat Dasgupta, CEO Esquire Capital Investment

"The policy rate decision is very surprising. We expected at least a 25 basis point cut in the repo rate so that the economy gets stimulated a little bit. But it doesn't look like that is happening. There is already a slow down in the economy because of demonetization. So we expected some action to be taken."


"We certainly expect the RBI to cut rates in the next policy meet. It will become a big problem otherwise."


"Inflation will remain low. This was an opportunity for the governor to cut rates; so I think it is a missed opportunity."

Sandip Sabharwal, Domestic Private Fund Manager


"Market rates are down so policy not very relevant."


"Withdrawal of Incremental CRR from 10th Dec is a positive. RBIs assessment of inflation outlook is likely to be wrong given demands destruction post demonetization."


"Urjit Patel seems to have tried to prove that he has not sold his soul to the government."


Chakri Lokapriya, CIO; TCG Group Holdings LLP


"We read that RBI thinks there is a demand crunch and lack of cash will lead to supply constraints which will raise inflation. RBI is seeing growth at 7.1 percent vs. 7.6 percent and higher inflation due to supply constraints."


"RBI should have cut rates to bring back growth rather than focus on supply side risks which are more sticky. Focusing on items such as rise in crude prices as risks over which RBI has no control is not an appropriate stance."


Rupa Rege-Nisture, Chief Eeconomist, L&T Finance Holdings


"I think RBI will cut the rates in the next policy meet quite aggressively, by 50 basis points."


"They left the rates untouched because they had to focus on financial stability and rupee stability. Whatever transmission had to happen has already happened."


Tirthankar Patnaik, India strategist, Mizuho Bank


"We are certainly disappointed with the lack of clarity from the policy commentary on the impacts of demonetization."


"The central bank's decision to keep rates unchanged opens up room for a rate cut in February. While we do not see any upside risks for the next two quarters, we do believe that the monetary policy stance will be more dovish going ahead."


Devendra Kumar Pant, Chief Economist, India Ratings

"It was not a surprise to us. The situation is pretty uncertain both global and domestic. Commodity prices are inching up. Monetary policy should not viewed from the point of view month-to-month inflation. Policy should always be about what the future looks like."

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