RBI’s monetary policy for 2013-14 is well balanced, with a slew of measures to address the strengthening of bank balance sheets, said P. Jayarama Bhat, Managing Director, Karnataka Bank Ltd.
Bhat told Business Line the 25 basis points repo rate cut reflects the Government’s commitment to rein in the fiscal deficit as well as the slight improvement in the macro-economic conditions.
The cut in the policy rate was along expected lines. He said the guidance was with a more hawkish undertone, and rightly so, because there are still upside risks to inflation and high current account deficit.
The strong statement that the scope for further monetary actions is limited in the present macro-economic conditions may put pressure on interest rates in the short-term, he said.
The projection of the growth rate at 5.7 per cent also seems to be realistic under the present conditions. Demand is expected to pick up towards the second-half with positive actions expected on the fiscal side also, Bhat said.
The reduction in consumption may reduce the current account deficit from the current high levels, he added.