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Below the Comment RBI Policy by Rajkumar Singhal, CEO, Quest Investment Advisors

“The RBI’s decision to keep repo rate on hold and continue the ‘neutral’ stance is largely on the expected lines. The central bank wants to adopt a ‘wait and watch’ policy as the country’s macroeconomic fundamentals are strong and there is no major threat to GDP growth – retail inflation is benign and it is expected to be within the tolerance limit, bank credit growth is healthy, forex reserves are in a comfortable position, and the GDP growth outlook is bright.

However, there are a few external headwinds. RBI observes that the US trade barriers will hit export growth, geopolitical tensions may disrupt global trade, and financial markets may remain volatile. Continuing rupee depreciation is another concern. A notable tailwind is the recent GST rate rationalization, which is expected to boost domestic consumption. So, RBI is waiting to see the real impact of trade tensions and a likely consumption boom.

Further, RBI has proposed changes in the FEMA rules to liberalize NRI investments. It also liberalized bank funding norms for capital market participation and enhanced the limits of lending against shares. It relaxed NBFC funding to operational infrastructure projects, which will eventually strengthen the financial position of non-bank lenders. These bold steps will undoubtedly boost investor confidence.”

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