Quote on RBI Monetory Policy by Mr. Ajit Banerjee President and Chief Investment Officer at Shriram Life Insurance
Below the Quote on RBI Monetory Policy by Mr. Ajit Banerjee President and Chief Investment Officer at Shriram Life Insurance
RBI’s 25-basis points rate cut signals the intended convergence of the fiscal and monetary policymakers to step up economic growth of the country, which has been showing signs of deceleration.
The MPC expected the GDP growth to recover going forward, although at a lower rate than last year’s. It felt that the inflation dynamics have opened space for the RBI to ease rates. Against this backdrop, the RBI pegged the FY26 inflation target at 4.2% while it retained the forecast for FY25 at 4.8%. The Q4 FY25 inflation projection was revised to 4.4% from 4.5% earlier. Similarly, the Q1 FY26 inflation estimate was revised lower to 4.5% from 4.6% earlier. Inflation in Q2 FY26 is projected at 4%, the same as earlier. Meanwhile, for Q3 FY26 and Q4 FY26, inflation estimates are pegged at 3.8% and 4.2%, respectively.
The RBI MPC projected real GDP growth for FY26 at 6.7% with Q1 at 6.7%, Q2 at 7%, and Q3 and Q4 at 6.5% each. The GDP growth estimates are made with the assumption of a good rabi crop harvest, accompanied with an expected industrial recovery. However, the RBI governor also cautioned against the headwinds blowing in the form of geopolitical tensions, protectionist trade policies, volatility in the international commodity prices, and financial market uncertainties, which have the potential to disturb the growth projections. We expect the RBI to keep a close watch on the liquidity conditions of the market to ease some durable and frictional durable liquidity stress.
The rate-sensitive sectors, such as housing finance, banking, vehicle lending, etc., on Friday, February 7, exhibited a mixed response to the RBI’s decision to lower the repo rate by 25 bps to 6.25 per cent from 6.5 per cent.
Above views are of the author and not of the website kindly read disclaimer
