Mumbai (Maharashtra) [India], August 6 : As the Reserve Bank of India's Monetary Policy Committee keeps the policy rates unchanged on Wednesday, Economists have largely welcomed the decision to hold the policy repo rate steady, viewing it as a balanced approach.
The economists highlighted that this move reflects both confidence in the domestic economy and caution amid global uncertainties.
Ranen Banerjee, Partner and Economic Advisory Leader at PwC India, said the MPC has rightly pushed the pause button as there is no urgent need for another rate cut.
"The growth forecast has been retained at 6.5 per cent, which may come under some mild pressure but may not be very off, with a 10-20 bps downside risk. Any downsides on the external front are likely to be cushioned from the domestic demand uplift possibilities," he noted.
Banerjee added that domestic demand is likely to remain strong, supported by benign inflation and the trickle-down effects of income tax cuts at the lower end of the income spectrum, where the marginal propensity to consume is higher.
Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, highlighted that while inflation is currently under control, it is expected to trend higher going forward.
"The MPC's decision to keep rates unchanged comes in the wake of global uncertainties, even as inflation remains benign and downside risks to growth persists. With inflation likely to trend higher post the near term favourable trends, the bar for rate cuts ahead is set very high. We can see some room for the last leg of easing only if growth momentum slows significantly," she explained.
Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Group, also pointed to a stable inflation outlook and strong growth.
He said, "With medium-term inflation projected to hover around 4 per cent, we expect the terminal repo rate in this cycle to settle near 5 per cent. This points to room for an additional 50 bps reduction, with a further 25 bps cut possible if inflation consistently remains below 4 per cent."
According to him, the current policy environment supports a constructive outlook for both equity and debt markets.
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