The Reserve Bank's decision to keep interest rate unchanged will provide it an elbow room to continue focus on moderating inflation for resilient and sustained economic growth, said industry experts.

For the ninth time in a row, the central bank decided to continue the status quo and kept the benchmark repo rate at 6.5 per cent.

Madan Sabnavis, Chief Economist, Bank of Baroda said the RBI has quite unambiguously stated that the focus would be on headline inflation and that one cannot ignore food inflation, especially if it is persistent.

"This indicates that while inflation will come down in Q2, it will rise in Q3, and one cannot take a rate cut for granted in future. Any decision will be data-driven and hence a calibrated call will be taken. The picture may not be very clear in October and hence any change in policy and stance could be more likely not before December," Sabnavis said.

Commenting on the RBI's decision to keep the benchmark rate unchanged, industry body Assocham said it has come about in the wake of robust GDP prospects of 7.2 per cent in 2024-25 providing elbow room to the central bank to continue with its focus on moderating inflation for a resilient and sustained economic growth.

"The message in the RBI monetary policy is to keep price stability at the top of its priority list with an objective of sustained economic growth. We see convergence in these two objectives even as there is an expectation of change in stance towards 'accommodation' in the next one or two policy reviews," said Assocham Secretary General Deepak Sood.

Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry said, "The status quo stance of the monetary policy, amidst continuing geopolitical crises and strong domestic macroeconomic fundamentals is welcome."

Ranen Banerjee, partner and leader, economic advisory, PwC India said the continued pause in the policy rate and sticking with the stance of withdrawal of accommodation was expected given the RBI Governor’s earlier statements.

"There is no pressing need for any action on the policy rate as the yields on 10-year paper have already softened by almost 20bps owing to the index-linked flows. There is still volatility in food prices and risk of food inflation that will keep the CPI elevated above 4 per cent in FY25," he said.

In his comment, Nikhil Gupta, Chief Economist, MOFSL Group said what probably was more important was the Governor's emphasis on the headline inflation and the focus on inflation deceleration when growth remains so good.

"This, to our mind, indicates that rate cuts are not coming anytime soon (unless growth falters)," Gupta added.

The RBI also announced several measures on payment and lending fronts, including steps to speed up cheque clearance and increasing frequency of reporting to CICs.

Anil Gupta, Senior Vice President, ICRA Ltd said given the ease of credit availability through digital processes, the leveraging and the credit profile of the borrowers can change quickly and faster reporting by lenders to credit bureaus will help in improved decision-making by the lenders.

Angad Bedi, managing director, BCD Group said the RBI's decision to maintain the status quo on the repo rate underscores the central bank's commitment to stability and prudence in India's economic landscape.

"This approach is expected to keep EMIs at a manageable level and borrowing costs predictable, which will benefit homebuyers and house loan borrowers. The real estate sector is poised to benefit from this steady stance, leading to an increase in sales and investments, thereby fostering economic growth," Bedi said.

Adhil Shetty, CEO of BankBazaar.com welcomed RBI's step to set up a repository of digital lending apps.

"It is a move that will help consumers identify fake apps and encourage them to use only legitimate digital lending apps. Only regulated entities will be permitted to report and update info about the digital lending apps whose services they are availing," Shetty said.

CFP of BPTP Manik Malik said the RBI's decision is a highly encouraging move for the Indian real estate industry, as stable home loan rates foster an environment conducive to rapid growth and development.

"This announcement is expected to significantly benefit real estate hubs like Gurgaon, which are likely to see a surge in demand in the second half of 2024. The RBI's effective regulation of inflation rates sets the stage for substantial growth and development in the latter part of the year," Malik said Mihir Vora, CIO, TRUST Mutual Fund said the tone of the policy was 'mildly hawkish'.

"The Governor in his statement mentioned the potential implications on the emerging markets due to potential growth slowdown in major economies, geopolitical tensions and the unwinding of carry trades causing turmoil in global financial markets," he said.

However, Governor Shaktikanta Das reassured that India’s macroeconomic fundamentals are robust and that strong buffers have been built to mitigate any such global spillovers, Vora added Lakshmi Iyer, CEO (Investments & Strategy), Kotak Alternate Asset Managers said the RBI does not seem to be under any duress to act just because of global developments.

"Markets to be guided by Development on the global policy front, domestic inflation, and monsoon progress. Bond yields to continue to find anchor due to FPI buying," Iyer said.

Parijat Agrawal, Head – Fixed Income at Union Mutual Fund said RBI's focus remains on bringing headline inflation on a durable basis to a 4 per cent target.

"Although core inflation is in disinflationary trend, volatile food inflation is a cause of worry. Growth remains robust as visible in high-frequency indicators," Agrawal added.

Vaidyanathan Srinivasan, Operating Partner, Essar Capital, said the RBI's cautious stance acknowledges the fragile economic environment, emphasising the importance of fostering growth initiatives while keeping inflation in check.

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