RBI monetary policy reaction: Soumitra Majumdar, Partner, JSA

6 Apr 2023 , 01:29 PM

RBI’s Monetary Policy Statement reflects cautious optimism. Acknowledging the necessity for continuing the war on inflation, anticipating some softening in inflation, the RBI takes steps to give fillip to growth. The unchanged rates should instil some level of confidence and certainty in pushing credit growth and deployment. Coupled with sustained growth, the RBI has also emphasised strong prudential checks on financial institutions, to ensure financial stability and to insulate India from the financial sector crisis in some of the other major economies. While the growth forecast has been tempered down, however, the RBI’s measured stance should improve India as an investment destination. Together with strengthening macro-economic fundamentals, the RBI’s step to completely digitise its approval process – with transparent tracking and timelines is an extremely important positive step for instilling investor confidence. Permitting forex derivatives for residents through the IBU’s should provide the dual advantage of enhancing hedging options to residents, as well as further develop the IBU’s. Without exception, this statement also emphasises on fintech innovations. The pre- sanctioned credit limits through UPI could also push retail demand – adding the much- needed fuel to the Indian growth story.