 "Rajiv Bansal")
Volatility is the new normal. Under the current global economic backdrop, India is best placed to make monetary policy moves.
Today 's decision by the governor of the Reserve Bank of India (RBI) is both a welcome and necessary move, wherein he surprised the market participants with a 50 basis points (bps) cut, when expectations were 25 bps. It could not have been timed better, when industries are seeking a favourable business environment to grow. A right balance between industry's demand for lower rates and curbing of inflation has been struck. Lower commodity prices in the past few quarters and renewed concerns on global growth are expected to keep commodity inflation under check.
The recent relatively weaker April-June GDP growth reading of seven per cent as well as moderate July IIP at 4.2 per cent have been a cause of concern. The present uncertain global climate, with Chinese economy slowing faster than anticipated, has affected commodity prices adversely. Commodity-driven economies like Brazil, Australia, Canada and Russia. have already witnessed growth rate revisions. Due to this, US Fed also decided to delay the much anticipated rate hike. Under these circumstances, this decision by RBI provides an absolutely positive signal to global investors and to the industry.
Our Prime Minister's favourite Make in India will definitely get further boost from this decision, as industry will look to invest in capacity expansion, favoured by lower interest rate regime and an accommodative stance. The trinity of a weak currency, low inflation and easing monetary policy could be the best recipe for India to aspire for annual double-digit growth in the next few years.
Rajiv Bansal
CFO, Infosys
