RBI's accommodative stance to pave way for 9.5% economic growth: Experts

The Reserve Bank's decision to continue with its accommodative monetary policy stance would pave the way for a double-digit economic growth, said the industry and experts on Wednesday as the central bank kept the key interest rate unchanged.

After deliberating for three days, the RBI Governor-headed Monetary Policy Committee announced the bi-monthly monetary policy. The RBI also announced it will continue rebalancing liquidity conditions and use VRRR (Variable Rate Reverse Repo) auction as the primary tool for liquidity management, shifting away from the fixed reserve repo rate.

"The accommodative policy stance at this juncture would not only pave the way for a double digit GDP growth in the current year 2021-22, but will also help in creating a strong, sustainable and vibrant economy going forward," said Pradeep Multani, President of PHD Chamber of Commerce and Industry in his comments on the MPC decision.

He also said that it is inspiring to note that the RBI has retained the projection for GDP growth at 9.5 per cent for 2021-22 despite the prevailing uncertainty caused by a new variant of Coronavirus.

Bipin Preet Singh, Managing Director and CEO of MobiKwik said the acceptance of UPI payments through feature phones will widen the horizon of financial inclusion in India and enables a digital footprint for the masses, a prerequisite for evaluating the creditworthiness of an individual.

"It is a gamechanger of sorts for a common man in India who can now be eligible for other financial services such as Buy Now Pay Later, Digital Insurance, Small Ticket loans as well," he said.

The RBI has proposed to launch a UPI-based payment product for feature phone users.

In his comments, V Swaminathan, CEO of Andromeda and Apnapaisa said the decision to keep the key rates unchanged will help the economy to grow at 9.5 per cent in the current fiscal.

"With the current inflation within the RBI's threshold values of 2-6 per cent, this decision is likely to boost the auto sector more while offering some cushion to all borrowers," he said.

Rajiv Sabharwal, MD and CEO of Tata Capital opined that the RBI has once again assured the markets that adequate systemic liquidity will be maintained to achieve growth and stability.

Meanwhile, SBI in a research report said the decision to maintain status quo on reverse repo is a well thought out move, though MPC is not empowered to act on reverse repo as per the RBI Act.

"Even though short rates at VRRR auctions have moved up and there are commentaries suggesting the RBI has already acted stealthily on rates and hence an increase in reverse repo would have been a non event in MPC decision, such a perception is seriously misleading," said the SBI Ecowrap.