Here's What Experts Make Of The RBI Monetary Policy

Some experts feel that the 50 basis points may have been a little aggressive, while others feel that there are more hikes to come. Here's what some of the experts say.

Indian Bank, MD & CEO, Shanti Lal Jain

"To rein-in the runaway inflation, the RBI raised the Policy rates by 50 bps.
The CPI inflation continued to breach the RBI's upper target range for the sixth straight month and remained above 7% for the third month in a row. Through this policy, RBI has brought in several measures including raising of policy rates by 50 bps so as to maintain price stability while keeping in mind the objective of growth.

The central bank has already started tightening the liquidity in the system along with withdrawal of accommodative stance in a calibrated manner. However, the domestic inflation, which has been mainly driven by supply side constraints, appears to have peaked off.

To allow Standalone Primary Dealers (SPD) to offer Forex services as AD category bank will strengthen the Forex market. Further, by permitting SPDs for Offshore Rupee OIS will remove the segmentation of domestic/offshore prices.
By enabling cross border inward bill payment system, ease and convenience of the NRIs will improve along with the forex inflow.

Setting up a committee for removing the hurdles related to MIBOR will help in transition of MIBOR as an international alternate benchmark."

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company Ltd.

"Prima Facie, while today's 50 bps policy rate hike appears slightly hawkish, we reckon RBI has rightly continued to frontload the rate hikes. Today's policy verdict comes in the backdrop of heightened volatility in the forex and rates market and the synchronized global policy tightening. Post today's rate action and with global data flow and commodity prices continuing to show signs of softening, we believe we are close to the end of the rate hiking cycle in India. Overall, the undertone of the policy was reassuring with MPC reiterating its commitment to being supportive of growth recovery.

Raghvendra Nath, Managing Director, Ladderup Wealth Management Private Limited

"As indicated by RBI in the MPC, the GDP growth is likely to remain intact and they do not expect any major changes in the GDP estimates going forward. However, considering RBI's expectation of a higher inflation in the next 2-3 quarters, 50 bps hike seems to be a decision in the right direction. RBI has moved away from its accommodative stance. The RBI will keep a close watch on the inflation levels which is dependent on several factors like commodity prices, monsoons, etc. We believe the rate hike is likely to have an impact on the consumption levels in the economy. Due to this we may witness lower GDP numbers compared to the estimate."