 "RBI keeps rates unchanged; factors in recent decline in inflation: Sunil Godhwani")
The Reserve Bank of India (RBI) has acted in line with Street expectations and kept the repo rate and cash reserve ratio unchanged at eight per cent and four per cent, respectively, in the first bi-monthly review of its monetary policy.
RBI governor Raghuram Rajan, who otherwise has a knack of taking markets by surprise, kept rates steady, with the central bank taking comfort from the recent decline in headline inflation.
The markets also have a reason to cheer because RBI clearly indicated more rate hikes are unlikely in the near term if inflation stays on the intended path. Further, the full impact of rate increases undertaken between September 2013 and January 2014 is yet to play out.
Going forward, it will be critical that the crucial south-west monsoon arrives on time and is uniformly distributed to ensure healthy farm sector output. With some report of El Niño surfacing, any disruption in monsoon current might hurt the farm sector and push up crop prices, thereby adding to inflationary pressures.
The central bank pegged FY15 GDP growth at five-to-six per cent, but with downside risks. It is, thus, important that the new government, which takes charge after general elections in April-May, immediately gets down to the task of reviving growth, facilitating pick-up in demand, and taking steps to boost both the industrial and services sectors.
The central bank's plans to devise the framework for on-tap licensing as well as differentiated bank licences, is a step in the right direction. It will ensure companies interested in making a foray into the banking sector will not have to wait for several years to apply for a licence. In a country like India, it is important that banking is accessible and affordable for every Indian. Thus, more banking players, even with varied roles and mandate, is a welcome move.
RBI governor Raghuram Rajan, who otherwise has a knack of taking markets by surprise, kept rates steady, with the central bank taking comfort from the recent decline in headline inflation.
The markets also have a reason to cheer because RBI clearly indicated more rate hikes are unlikely in the near term if inflation stays on the intended path. Further, the full impact of rate increases undertaken between September 2013 and January 2014 is yet to play out.
Going forward, it will be critical that the crucial south-west monsoon arrives on time and is uniformly distributed to ensure healthy farm sector output. With some report of El Niño surfacing, any disruption in monsoon current might hurt the farm sector and push up crop prices, thereby adding to inflationary pressures.
The central bank pegged FY15 GDP growth at five-to-six per cent, but with downside risks. It is, thus, important that the new government, which takes charge after general elections in April-May, immediately gets down to the task of reviving growth, facilitating pick-up in demand, and taking steps to boost both the industrial and services sectors.
The central bank's plans to devise the framework for on-tap licensing as well as differentiated bank licences, is a step in the right direction. It will ensure companies interested in making a foray into the banking sector will not have to wait for several years to apply for a licence. In a country like India, it is important that banking is accessible and affordable for every Indian. Thus, more banking players, even with varied roles and mandate, is a welcome move.
Sunil Godhwani
CMD, Religare Enterprises
CMD, Religare Enterprises