RBI Move On Expected Lines Say Experts, But Inflation A Cause For Concern

The move by the RBI to maintain an accommodative stance and hold the policy rates steady was largely on expected lines according to experts.

According to D.R.E Reddy, CEO and Managing Partner, CRCL LLP, the RBI's accommodative stance is a welcome move to revive and sustain growth.

"While the Indian economy is steadily reviving from pandemic led contraction, recent geo-political tensions has led to increase in price of the several commodities such as oil and natural gas, wheat and corn, edible oil, fertilizer, milk, chicken, poultry. The ongoing conflicts has brought in risk of slow growth and higher inflation. Given the scenario of increasing food and crude oil prices, we may see prolonged supply disruptions which will further harden food prices globally. Sharp increase in international prices implies increase in rates across manufacturing, agriculture and services," Reddy says.

Some analysts believe that the RBI is anticipating much faster inflation. Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers says the 40 bps hike in reverse repo rate was ahead of consensus expectations.

"The downward revision of GDP growth rate and upward revision of retail inflation were expected. The RBI is now anticipating much faster rise in inflation than earlier. The monetary policy stance, however, remains accommodative by normal standard. The RBI is also trying to flatten the yield curve by pushing the short-term rates higher and taking measures to ensure that the yield on long dated securities do not rise much. With today's measures RBI has moved to the path of gradual increase of policy interest rate and phased withdrawal of liquidity. From a medium term perspective, the measures are supportive of growth, price stability and orderly development in the financial markets," he states.

According to Ram Raheja, Director at S Raheja Realty the RBI's move to keep repo rate and reverse repo unchanged contain inflation and maintain liquidity will help in keeping the sentiment optimistic.

"For the real estate sector, the pandemic followed by the current global political crisis is a silver lining. Being a tangible asset and safe haven investment, people will continue to divert their funds to real estate. Residential real estate will witness a further impetus due to overall uncertainty leading people to return to focus on basic requirements like spacious living spaces. Investors will be closely watching the geopolitical conditions to further estimate growth and evaluate investment avenues," he says.