New Delhi: “The decision of RBI to cut the policy rates by 25 basis points, the third time during the current year, in its annual policy review, sends a strong signal that the RBI is refocusing its priority in favour of growth in view of the moderating WPI based inflation and weakening demand in the economy”, said S Gopalakrishnan, President, CII.
However, the given economic conditions required a bolder intervention from the RBI. The economy is certainly not out of the woods and there is a clear deficiency in demand as consumers are reluctant to undertake big purchases while investments are fraught with problems including the high cost of funds. In such a scenario, aggressive monetary easing affected by a 50 bps cut in repo rate would have provided the necessary stimulus, along with a 50 bps reduction in CRR, added the CII President.
Gopalakrishnan stated that falling global commodity prices, particularly that of gold and oil, expectations of a normal monsoon and a clear fiscal consolidation roadmap should have prompted the RBI to revisit its monetary policy stance and lean more towards growth at a time like this, when fiscal room for providing stimulus is extremely limited.