“RBI springs a shocker keeps the repo rate unchanged at 5.15%: Niranjan Hiranandani”

Mumbai, December 07, 2019: In a challenging scenario – and no better term to describe the Indian economy vis-à-vis GDP growth in the past few months. Given this, it would be expected that policy reforms and changes would all be focused on enhancing GDP growth.

The Indian Government has been coming up with measures to boost GDP figures, and a lowering of the repo rate was expected over concerns that growth momentum is slowing down; as also it being necessary to boost liquidity in the economy.

So, it was disappointing to see the Reserve Bank of India (RBI) Governor change his perspective, and has been positive about reduced interest rates impacting the demand side of the economy in his previous monetary policy reviews, this time he has opted to ‘maintain the accommodative stance while keeping repo rates unchanged’.

This is disappointing; India Inc. was expecting a rate cut of 1.0 instead of small tinkering such as a rate cut of 0.25 bps, which would have provided a boost to the Government’s recent initiatives to kick-start GDP growth.

Instead, we have a situation where the RBI Governor said that ‘the upcoming Budget would set stance for further economic policies’. Banks have not yet passed on the complete advantage of previous rate cuts to customers; this time we were hopeful that things would be different and we would see moves aimed at boosting the demand side.

The resulting situation brings back memories of what had been done in 2008, when following the Lehman Brothers crisis, a one-time roll-over had been allowed – in the present scenario, it becomes even more necessary.

Given that the RBI has also lowered its GDP growth forecast to 5 percent, it leaves one wondering why the logical step of a rate cut has eluded the Indian economy. Globally, one finds most banks are interest negative, and one wonders why we are not in sync with the global banking scenario.

In response to the fall in GDP growth rate, the Indian Government has come up with a slew of new fiscal policy measures, including a large reduction in the base corporate tax rate to boost private sector investment; last-mile funding for stalled and delayed real estate projects should be functional in the next couple of months. Given these aspects, one would have expected the RBI to reduce interest rates as part of the moves to support growth revival. Hopefully, in the near future, we should see remedial measures in the form of rate cuts.

Corporate Comm India (CCI Newswire)