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RBI Monetary Policy: Ananth Narayan, Indranil Pan and Soumya Kanti Ghosh decode impact on economy

Updated : June 04, 2021 15:42:03 IST

The Monetary Policy Committee of the Reserve Bank of India (RBI) kept the repo rate unchanged at 4 percent for the sixth consecutive policy. The central bank also maintained an accommodative stance amid uncertainty about the economic fallout of the second COVID-19 wave and rising inflation.

The reverse repo rate as well remains unchanged at 3.35 percent. MSF and Bank rate is maintained at 4.25 percent.

Here’s how experts reacted to the policy.

Ananth Narayan, Professor at SPJIMR

“The RBI is in a tough spot. If you look at it over a 2 year period, you have got GDP which is lower than it was 2 years ago and inflation over the last 2 years has grown at about 5.7 percent compounded annual growth. So, it is a really tough spot for any central banker given the circumstances. I guess given that, he (RBI Governor) has tried to do what he could – provide some comfort to interest rates, to the financial sector, government borrowing programs, and try and give growth a chance. Overall it has been a pretty good balancing act by the Governor.”

Soumya Kanti Ghosh, Group Chief Eco Advisor at SBI

“The RBI has been doing its best to spur liquidity to the starved sectors. But the fundamental problem over here is that credit growth is unlikely to pick up because if you look at the data, there has been a significant amount of deleveraging by the stressed sectors by issuing bond issuances at low cost and nobody is willing to invest in this uncertainty. So, only an activist fiscal policy at this point can rekindle animal spirits. Monetary policy has done its best to rekindle that, but I am afraid the mantle has to pass on to the fiscal policy now for growth to revive in a meaningful and tangible manner.”

Neeraj Gambhir, President & Head-Treasury & Markets at Axis Bank

“The fact that they (RBI) came out with a G-SAP 2.0 of Rs 1.2 lakh which is 20 percent higher than the previous tranche, continues to suggest that the Reserve Bank will be there in the market to make sure that the yield curve is well managed.”

SS Mallikarjuna Rao, MD & CEO at PNB

“Increasing restructuring from Rs 25 crore to Rs 50 crore is a good measure. Non-MSME, small businesses, and individuals are the Delta-X in the current declaration by RBI. Those people who were not included in the restructuring window will be included now. So, overall it is a good measure.”

Indranil Pan, Chief Economist at Yes Bank

“Our own estimate is more docile at an 8.5 percent. Even if the pandemic might end and it might flatten by the first quarter of the financial year, the scathing of the second wave in my opinion continue for some more time given the fact that the rural sector has been hit in a very bad way this time. There could be a lot more haziness in terms of how people would want to spend. I don’t think that the same story as we had seen in the last year in terms of the pent up demand might repeat itself this financial year. So, in terms of the growth perspective, we are slightly more cautious than the RBI.”

For the full discussion, watch the video.
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