New Delhi, June 5 (IANS). The decision by the Reserve Bank of India (RBI) to keep the policy repo rate unchanged is focused on maintaining financial stability and will keep economic growth prospects strong in the long run. Economists and industry experts said this on Friday.
Dr. Ranjit Mehta, Chief Executive Officer and General Secretary, PHD Chamber of Commerce and Industry (PHDCCI), said that this monetary policy decision reflects a balanced approach keeping in mind the risks facing the economy.
He said that global uncertainties have increased, but this move by RBI has created a favorable environment to maintain medium and long-term growth prospects.
PHDCCI President Rajeev Juneja said inflation still remains around the RBI’s target range of 4 per cent, but geopolitical risks impacting the global supply chain could impact gross domestic product (GDP) growth prospects for FY 2026-27.
However, he said the Indian economy still remains resilient and strong due to strong domestic demand.
Experts also warned that supply shocks, higher energy prices and a weaker-than-normal monsoon could weigh on economic growth.
Madan Sabnavis, Chief Economist of Bank of Baroda, predicted that if inflation increases to near 5.9 percent, then interest rates may increase by the end of this year.
He said, “We are looking at the possibility of one or two interest rate hikes this year. It seems that the monsoon may have an impact, although at the moment it has been balanced to some extent.”
Sabnavis further said that the comprehensive steps taken by the RBI to increase foreign exchange inflows through foreign portfolio investment, external commercial borrowings and foreign currency non-resident deposits have come as a positive surprise.
He said that the foreign exchange market has responded positively to these announcements. Now it remains to be seen whether this changes the investment trend of foreign portfolio investors in the debt market.
Furthermore, Indian Bank Managing Director and Chief Executive Officer Binod Kumar welcomed the measures taken to keep the rupee stable.
“The Indian economy has shown remarkable strength amid the geopolitical crisis and has successfully responded to global challenges. The RBI’s decision to keep interest rates steady reflects its focus on economic growth,” he said.
Binod Kumar further said that demand in the retail, agriculture and micro, small and medium enterprises (MSME) sectors will continue to grow as policies to improve the economic situation are being implemented.
He said that this policy further strengthens the confidence in the fundamental strength of the Indian economy.
Tribhuvan Adhikari, Managing Director and Chief Executive Officer (CEO), LIC Housing Finance, said that the stable interest rates environment will support the demand from the housing sector.
He said continuation of the current interest rate regime will boost borrower confidence, improve credit flow and strengthen housing demand across various markets.
–IANS
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