As the Reserve Bank of India, in its latest monetary policy committee meeting, decided to change its stance to ‘Neutral’, the Associated Chambers of Commerce and Industry of India (Assocham) has described the RBI monetary policy review as realistic and pragmatic. The chamber has stated that the change in stance has given a signal about the interest rates reversing downwards in the next few quarters.
“The change in stance to 'neutral' from withdrawal of accommodation should be seen as a positive development pointing towards the RBI's flexible monetary policy to be driven by the unfolding domestic and global events,” stated Deepak Sood, Assocham’s Secretary General.
Sood highlighted that while the domestic economic landscape looks promising in the wake of inflation moderating below four per cent and consumer demand set to further pick up in the ongoing festive season, geo-political events need to be monitored, as rightly pointed out by RBI in the monetary policy statement.
Assocham agrees with an optimistic assessment of the central bank with regard to projected overall GDP growth of 7.2 per cent for fiscal 2024-25, on the back of brighter prospects in agriculture and the consequent pick up in rural demand. Sood said that signs of improving rural demand are already visible in some of the high-frequency data like tractor and two-wheeler sales and the FMCG sector.
The Assocham Secretary General said that RBI's unambiguous focus on aligning the inflation data to the target of four per cent augurs well for a sustainable long-term growth. ''This approach would ensure that the India story remains robust for long',” he added.
He said despite the challenges of geo-political dynamics, the global economy has shown resilience, as seen through the credit policy statement. Sood stated that this should help our exports and boost the cross-border investment climate, though it is prudent to keep a close watch on developments.
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