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RBI’s Move To Keep Interest Rates Low To Boost Business Confidence: India Inc

The central bank on Friday expectedly kept interest rates unchanged at a record low of 4 per cent, as it chose to support economic revival over inflation.

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The Reserve Bank of India’s decision to keep key interest rates unchanged and maintain an accommodative monetary policy stance will boost the confidence of businesses and consumers, India Inc said on Friday.

The central bank on Friday expectedly kept interest rates unchanged at a record low of 4 per cent, as it chose to support economic revival over inflation. It also maintained an accommodative stance as the economy is yet to recover from the impact of the second COVID wave.

PHDCCI President Sanjay Aggarwal said the central bank maintained the status quo, despite the high inflation stoked by a few products.

'Continuation of an accommodative stance to revive and sustain the economic growth trajectory amid the impact of COVID-19 will boost the confidence of business and consumers. It is encouraging that RBI has retained the projection for GDP growth at 9.5 per cent for FY2022 in the difficult time caused by the pandemic,' Aggarwal said.

Going ahead, he said, there is an expectation of a continuation of the accommodative policy stance by the RBI to rejuvenate the aggregate demand in the economy.

'We urge the banking sector to transmit all the cuts in the repo rate by the RBI during the last financial year to percolate the benefits to trade, industry and consumers for rejuvenating the demand and economic growth trajectory, going forward,' Aggarwal added.

Assocham said the full credit must be given to the RBI for prioritising growth and retaining the accommodative stance on policy rates.

“Its expectations that inflation should moderate from the third quarter of the current fiscal year are realistic as various supply-side issues would be resolved by then. Besides, with the monsoon picking up pace, a positive impact on food inflation should be seen,' the chamber said in a statement.

By keeping the low-interest rate regime in place with an unchanged repo rate of four per cent, the RBI and the government have been on the same page for lending full support to the nascent growth, it added.

Commenting on the monetary policy, Ficci said the central bank's indication yet again to continue with the accommodative stance, until necessary, to revive growth is encouraging.

'This is especially comforting when there was an expectation about the normalisation of the monetary policy. The RBI has thoughtfully navigated monetary policy through the pandemic. We are confident that the same thoughtfulness will continue in the future, especially in view of an anticipated third wave and the continuing softness in the economy,' the chamber said in a statement.

It also said the extension of the deadline by six months to meet the financial parameter requirements under the Resolution Framework 1.0 announced last year came as a respite.

However, given the way the COVID situation has evolved, some of the deeply stressed sectors may need a longer period to be able to meet the financial parameters, it added.