RBI status quo expected amid inflation concerns: India Inc

With the RBI holding rates in its monetary policy review, India Inc today said the status quo was on expected lines amid concerns over inflation and risks emanating from a wider fiscal deficit.
Industry bodies, however, felt a rate cut would have spurred private investments which remain sluggish.
The Reserve Bank left the key rate unchanged in its policy review. The repo rate, at which the central bank lends short-term money, will continue to stay at 6 per cent. The reverse repo, rate at which it borrows from banks and absorbs excess liquidity, will remain at 5.75 per cent.
"In a way, the RBI decision is a relief for India Inc, as some of the concerns raised by the central bank, including the inflation crossing the 5 per cent threshold and uncertainty over crude prices, are quite justified," Assocham President Sandeep Jajodia said.

Besides, the decision of the government to significantly increase the minimum support price (MSP) for farmers may have a negative impact on the retail inflation, he said.
Anil Khaitan, President, PHD Chamber of Commerce and Industry, appreciated the calibrated stance of the RBI for keeping the rates unchanged in the monetary policy.

He said there were lot of apprehensions in the market that disruption from the path to fiscal consolidation along with rising inflation can lead to tougher monetary measures.
"Going ahead, we look forward to the softer stance of monetary policy as supply side reforms would go a long way to check the prices," Khaitan said.

However, Ficci President Rashesh Shah said there has been only one repo rate cut by the RBI of 25 bps during the last fiscal year, and the recently released Economy Survey clearly states that inflation during 2017-18 averaged the lowest in the last six years.
"Undoubtedly, there has been a missed opportunity of lowering interest rates significantly, which could have provided a major boost to private investments," Shah said.
He hoped that going forward, the RBI would give an equal consideration to growth concerns, especially given the fact that inflationary pressures in India are largely due to supply side factors on the agriculture front.

Deterioration in public finances risks crowding out of private financing and investment, the RBI said, adding that the nascent recovery needs to be carefully nurtured.
The central bank, however, said that it is too early to assess the impact of the minimum support prices hike in foodgrains and the impact on inflation.
It also lowered its growth target to 6.6 per cent for the current fiscal ending on March 31, from 6.7 per cent earlier, but said that it will accelerate to 7.2 per cent in 2018-19.
The RBI had switched stance to neutral from being accommodative in February last year as it saw rise in inflation. It had last cut the repo rate by 0.25 per cent in the August 2017 monetary policy review.