Cost of liquidity high, RBI needs to inject Rs 2-3 trillion to ease liquidity conditions, says Neelkanth Mishra

Neelkanth Mishra, Chief Economist at Axis Bank, Head of Global Research at Axis Capital and UIDAI Chief.

Talking about the current liquidity stress in India's banking system, Neelkanth Mishra, Chief Economist at Axis Bank, Head of Global Research at Axis Capital and UIDAI Chief, said that while the RBI has introduced measures to infuse liquidity, an additional Rs 2-3 trillion will be needed to meaningfully ease financial conditions.

According to Mishra, the cost of maintaining liquidity in the economy stands high. "Easing liquidity is needed. RBI is working on easing liquidity, but we think Rs 2-3 trillion liquidity support is required," he said.

Mishra shared these views as part of a panel discussion at Moneycontrol's Global Wealth Summit 2025 taking place in Mumbai today.

To that effect, Mishra also blamed the liquidity stress in India's banking system as one of the three key triggers that inflicted a GDP growth slowdown in the economy. "On the monetary side, I think we've been unduly tight. The cost of liquidity has gone up," Mishra said.

Catch LIVE updates of Moneycontrol's Global Wealth Summit

Aside from the monetary tightening, Mishra highlighted regulatory risk aversion and a slower government spending as factors that inflicted the "self-induced" economic slowdown in the country. "There were three factors--fiscal, monetary and regulatory that caused the structural economic slowdown that we're seeing. On the fiscal side of things, we saw that in the first half of FY25, government spending remained unduly slow due to elections, but that has picked up now. As for the regulatory side, the regulators turned too risk averse, but at least some of the regulatory tightening has also eased," Mishra added.

Moving on, Mishra believes that once the three key headwinds faced by the economy are solved, India can move right back on its path of near 7 percent GDP growth.

As for India's longer-term GDP growth targets, Mishra stated that the economy should have a goal of 8 percent growth rate in the next 10 years.

Also Read | Markets can correct another 10%, believes Axis Capital's Neelkanth Mishra

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.