The Reserve Bank of India's (RBI) decision to keep policy repo rate unchanged focuses on preserving financial stability and will keep growth prospects intact in the long term, economists and industry leaders said on Friday
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NEW DELHI — The Reserve Bank of India's (RBI) decision to keep policy repo rate unchanged focuses on preserving financial stability and will keep growth prospects intact in the long term, economists and industry leaders said on Friday.
Dr Ranjeet Mehta, CEO and Secretary General, PHDCCI, said the policy decision reflects a balanced view of upside risks facing the economy. While external uncertainties have increased, RBI’s move created a conducive environment to keep medium to long term growth prospects intact.
“Although inflation remains within the target range of plus or minus 4 per cent, geopolitical risks affecting global supply-chain have increased dampening GDP growth prospects for FY2027 but the Indian economy still remains resilient with strong domestic demand”, added Rajeev Juneja, President, PHDCCI.
Experts also warned that supply shocks, high energy prices and a likely below‑normal monsoon could temper growth prospects.
Madan Sabnavis, Chief Economist, Bank of Baroda, forecasted possible rate hikes later in the year if inflation rises toward 5.9 per cent.
"We are looking at 1 to 2 hikes this year. It does look like there is a monsoon impact which has been buffered here," Sabnavis said.
He said "positive surprises" from the RBI were the "aggressive and comprehensive steps taken to get forex through FPI, ECB and FCNR (B) deposits."
The forex market has reacted positively, and it needs to be seen whether this can change the direction of FPI flows in the debt segment, he added.
Binod Kumar, MD and CEO, Indian Bank, called measures to stabilise the rupee a welcome move.
"Amid a geopolitical crisis, the Indian economy displayed great resilience and has withstood global headwinds. RBI’s decision to maintain rates underscores its focus on growth," Kumar said.
“Demand in Retail, Agriculture, and MSME (RAM) segments will continue to grow as policies to improve economic conditions and the health of the economy are implemented. This policy also enhances confidence in the fundamentals of the Indian economy," he added.
Tribhuwan Adhikari, MD and CEO, LIC Housing Finance, said a stable rate regime should support housing demand.
The continuation of the current rate environment is expected to support borrower confidence, improve credit flow, and sustain housing demand across markets, he said.