CHENNAI/MUMBAI/AHMEDABAD/NEW DELHI, APR 6
The Reserve Bank of India (RBI) on Thursday marginally revised upwards the economic growth projection for the current fiscal to 6.5%, from its earlier estimate of 6.4%. Unveiling the first bi-monthly monetary policy of 2023-24 fiscal, RBI Governor Shaktikanta Das said the GDP growth in the first quarter of 2023-24 is expected at 7.8%.
The growth for the second, third and fourth quarter of the current fiscal year has been projected at 6.2%, 6.1% and 5.9%, respectively.
The RBI also hit the pause button and decided to keep the key benchmark policy rate at 6.5% even as inflation is trending above its tolerance level.
The rate hike has been paused after six consecutive rate increases aggregating to 250 basis points since May 2022.
Monetary Policy Statement by Shri Shaktikanta Das, RBI Governor – April 06, 2023 https://t.co/nC83O31Hgo
— ReserveBankOfIndia (@RBI) April 6, 2023
FROM THE HORSE’S MOUTH
Y Viswanatha Gowd, MD & CEO of LIC Housing Finance
“Keeping repo rates the same is a welcome decision. This may put to rest the anxiety amongst the borrowers that emanated with the EMI increase consequent to a series of repo rate hikes. Today’s move sends a positive signal and improves the sentiments. We expect the real estate along with other sectors to build up on this as it has come at the beginning of the new financial year. The prospective homebuyers will now be encouraged to crystalise their buying decision.”
Dr Pawan Singh, MD & CEO, PTC India Financial Services
“The decision to maintain repo rate at 6.50% is positive news. It augurs well for the economy as well the corporate sector. The RBI has relatively balanced both inflation pressure and growth. The stabilization of interest rate for PFS is positive as we are helping meet national priority 1) meet net zero target 2) support climate finance 3) develop clean sustainable infra in the country, renewables, water, clean sanitization, green hydrogen, green mobility & infrastructure NMCG projects, transmission lines.”
Aalesh Avlani, Founder, Credit Wise Capital
“The RBI’s decision to keep the repo rate unchanged is expected to provide a much-needed boost to the NBFC sector and gives clarity on the overall direction the RBI is heading towards. This allows financial planning and maintaining borrowing costs not just for financial institutions but also for retail customers who have seen their EMIs rise significantly. Therefore, the pause button on the repo rate hikes should support the existing growth momentum in the NBFC sector.”
Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company Ltd
“Overall, an extremely Credible and Balanced Policy verdict, adding credence to our belief that India’s rate hike cycle is almost done. The decision to keep rates unchanged yet again exemplifies the pragmatic approach by RBI who has pre-empted a pause just the way it had pre-empted the rate hike cycle, unlike its global counterparts. RBI has indeed shown a very credible and fine balancing act and has not succumbed to the spectre of Inflation and other global central bank actions. RBI has instead taken its own course of policy path, which is indeed commendable in the current global economic backdrop.”
Puneet Pal, Head-Fixed Income, PGIM India Mutual Fund
“A pause not a Pivot,” this is how the RBI governor chose to describe the outcome of the MPC meeting today. The MPC today unanimously decided to hold the policy rates while retaining the monetary policy stance at “Withdrawal of accommodation.” The market was divided going into the policy with the swaps market pricing in a 50% probability of a pause. The yield curve has steepened marginally with the 5yr G-sec yield down by 10-11bps and the 10 yr yield down by 6-7 bps. Going ahead, the market will focus on RBI’s liquidity management and global yield movement. Supply pressure can negate any meaningful downside in yields and we expect the benchmark 10 yr bond to trade in a broad range of 7.00% to 7.40% over the next one quarter.”
Mahendra Jajoo, CIO, Fixed Income, Mirae Asset Investment Managers
“Taking note of the recent developments in global markets, including the banking system disruptions in the US, that are expected to result in a pivot in monetary policy globally, the MPC has kept the key policy rates unchanged. Even as the inflation remains on the higher side, the impact of the recent fast-paced rate hikes in moderating future inflation trajectory needs to be assessed before further action, especially as the inflation is now projected to moderate to 5.2% in FY24.”
Prashant Pimple, Chief Investment Officer – Fixed Income Baroda BNP Paribas Mutual Fund
“The monetary policy action is in line with our expectation of a pause ; though majority of market was expecting a 25 bps last hike. We take this move as a step towards a long pause with a cautious view over the food inflation as well as energy prices thereby impacting the overall inflation.
The MPC increased GPP for FY 24 from 6.40 to 6.50 % and also reduced the inflation outlook from 5.30% to 5.20% for FY 2024. Further , improvement in CAD in last 3 months bodes well for the economy. The yield curve is expected to steepen going forward with more certainty on the terminal rate. We expect the 10 yr to trade in the range of 7.10-7.25 in the near term.”
