Speaking on the monetary policy announced by the Reserve Bank Of India (RBI) on Tuesday, Yes Bank’s Chief Economist, Indranil Pan said, “Monetary policy remains on expected lines, even concerning the reverse repo rate. RBI paints a relatively docile picture on inflation for now whilst it wants to ‘assiduously’ nurture growth to make it ‘self-sustaining’. Immediate risks to growth as seen from the Omicron is one specific factor that allows RBI to stay on a status-quo for now.”
“RBI keeps the door ajar, but would probably be more patient on inflation being slightly on the higher side than growth on the faltering side,” Pan said.
“The turn in the investment cycle will be crucial, that unfortunately is yet to happen. Furthermore, RBI would want to factor in the fiscal policy of February within the scope of adjustments under the monetary policy. If fiscal policy is relatively tighter for next year, then the monetary policy might have to continue to remain accommodative,” he added.
Further adding to the statement, Indranil Pan said, “We believe that RBI will attempt to close the LAF (Liquidity adjustment facility) corridor in February if the understanding on the growth-inflation dynamics turns favorable towards growth. Any changes to the Repo rate are still way off and into FY23. Taking a call immediately may be difficult unless there is clarity on the new variant and the hurt it can inflict on the economy in the near term.”