The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) kept the repo rate unchanged in the first bi-monthly monetary policy meet for the financial year 2021-22, governor Shaktikanta Das said on Wednesday. With no change this time as well, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent.
Taimur Baig, MD and Chief Economist at DBS Group Research and Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India (SBI) shared their views.
The RBI governor has also emphasized on guidance, said Ghosh.
“One point which the government has emphasized is the guidance. Moving away from a time-based guidance to a state-based guidance is justified. Because given the current uncertain circumstances, it is better to go to a state-based guidance rather than time-based guidance. So overall it is a good, pragmatic policy. Overall the aim is to ensure that the borrowing cost of the government is at lower end and the government is able to borrow,” Ghosh stated.
“COVID-19 remains the key focus and it forces the policymakers and the markets to believe that the bias is towards more accommodation. There is no way any central bank in the world right now can start giving very brave signals about needing to tighten policy or worry about financial stability unless there is an outright crisis and thank goodness India is not in an outright crisis, global market sentiment towards Indian markets remain very positive. At this juncture, it makes all the sense in the world to give out as much dovish signals as possible,” said Baig.
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(Edited by : Abhishek Jha)