The status quo policy of the Reserve Bank has drawn mixed response from economists. Some of them expressed disappointment at not getting an expected 25 basis point cut in repo rate. A matching relaxation in the cash reserve ratio would have been a bonus for them.
Some others were of the view that the time for such precipitate action had not yet arrived, given the sticky inflation figures and an unenviable fiscal position.
Some agreed with the RBI position to stand pat, and chose to point fingers at the Government asking it to get its finances in order.
‘Right decision'
Mr Leif Lybecker Eskesen, Chief Economist for India and Asean, HSBC, said in a note: “The RBI surprised the market by staying on hold, but made the right decisions. The slowdown is to a large extent driven by supply-side constraints, which explains why inflation has remained elevated. Going ahead, the room for rate cuts is very limited, and policy efforts should focus more on deeper rooted structural reforms to boost growth.”
Dr Biswa Swarup Misra, Associate Dean of the Bhubaneswar-based Xavier Institute of Management, said that growth has taken a backseat in RBI's policy review, and inflation control has come to the forefront.
DIDN'T SURPRISE
To some other economists, the RBI action did not surprise at all. They are of the view that the time may not have come just yet.
Stating that the recent pressure on inflation has become more evident, Dr Shubhada Rao, President and Chief Economist of YES Bank, said: “I think the RBI would await more concrete steps from the Government towards fiscal adjustments.”
The Greek poll outcome may have come as a market positive and allowed the RBI the luxury of waiting for some more time for action.
Mr Indranil Pan, Chief Economist, Kotak Mahindra Bank, however, said: “We still do not anticipate the RBI to reduce its policy rates on July 31, the next policy meeting date. However, for the extended time horizon we continue to expect the RBI to deliver an additional 50 basis points (bps) cut in the repo rate and a 100 bps cut in the CRR before the current financial year is through.”