Comments on
RBI Policy by Mr. GS Sundararajan, Managing Director, Shriram City Union
Finance
The policy
review today (Sep. 20. 2013) is a carefully calibrated approach to influence market
expectations and perceptions about RBI's policy priorities. It tries to strike
a balance between supporting / encouraging economic activity in the near term
while leaving itself scope for policy appropriate to the economic situation in
the period ahead.
The move to
simultaneously increase the repo rate but significantly reduce the marginal
standing facility rate could help in easing banks' funding costs in the near
term. This could,
in the near
term, be supportive of credit expansion and the incipient pick up in industrial
/ infrastructure activity. But, the RBI
also has clearly signalled that future policy moves could be either way,
clearly indicating that is neutral on this front. Its actual stance is to be
determined by evolving market and economic conditions.
 |
| GS Sundararajan, Managing Director, Shriram City Union Finance |
The RBI
also has conspicuously reiterated its resolve to moderate inflation and
inflation expectations. It says there is
no room for complacency on the inflation front.
All in all,
the policy package could help in stabilizing financial markets in the near
term. It could thus build on the breathing space provided for many emerging
market economies by the US Fed's decision to postpone its QE tapering. At the
same time, the RBI is also preparing for the inevitable end of QE down the
road. One can therefore expect that when the inevitable taper and capital
outflows from emerging markets take place, domestic financial markets may not
be as volatile as they have been in the past few months.
