The Reserve Bank policy action would make available funds for productive sectors of the economy.
Ms Shubhada Rao, chief economist of YES Bank, said a cut in SLR meant that funds have been freed up.
TWIN CONCERNS
“The RBI stands ready to exhaust its open market operations option for meeting the requirement of funds needed for growth,” she said.
“The twin concerns of global uncertainty and the domestic macro issues are constraining growth at this juncture. Probably, the RBI move would be a starting point to break this vicious cycle,” Ms Rao added. Mr Biswa Swarup Misra, associate dean of the Xavier Institute of Management, Bhubaneshwar, said the cut in SLR would provide some leeway for banks to lend to private sector. “If there is going to be a bad monsoon, things would get much more complicated. It would have ramifications on the projected the 6.5 per cent growth,” he said.
INFLATION CONTROL
According to Mr Dinesh Thakkar, Chairman and Managing Director, Angel Broking, the RBI stance is clearly focused on inflation control.
Acknowledging the weak environment, it reduced GDP growth estimates to 6.5 per cent and increased inflation estimates to seven per cent for FY13. This suggests low possibility of rate cuts in the near future, Mr Thakkar added.
RBI is in line with its assessment of the macro economic situation, said Mr Devendra Kumar Pant, director, Fitch ratings India.
Inflation has remained sticky and at high levels. In the absence of significant fiscal consolidation, headroom available for monetary policy action is limited. Monetary policy in isolation cannot address all the issues the Indian economy is facing. Both monetary and fiscal policies have to move in tandem to resolve the issues faced by the Indian economy, Mr Pant added.
( vinayak.aj@thehindu.co.in , vinson.kurian @thehindu.co.in )