RBI’s Monetary Policy Committee Meeting

What does RBI’s bi-monthly Monetary Policy Committee meeting reveal?

Bullish on growth and dovish on inflation, is the revelation and meaning of the monetary policy review revealed by the central bank on Thursday the 5^th April 2018.

1. It was expected that the MPC headed by RBI Governor, came out with a status quo position on interest rates and it was indeed a surprise for the market that MPC had taken a soft stance on inflation.
2. GDP growth is expected to go up to 7.4 per cent, from 6.6 percent in the Financial Year 2018.
3. However, the central bank did not come out with any decision on bank scams involving the diamond merchant Nirav Modi and Punjab National Bank, and the ICICI bank issue, wherein the top management has been found to be guilty.
4. No decision was taken on the dual regulation of the PSU Banks, which was considered to be a different issue.
5. International market had an overnight rally, and the investors welcomed the RBI’s dovish action on inflation and higher projection on growth, which resulted in some active buys in the market.

Comments:

There are also comments from other sides on the MPC meeting and its dovish attitude on the policy review:

1. A pick up in private investments depends on IBC process and capitalization
2. In the second half of the year, some hawkish move is expected.
3. With most part of the cost of borrowing being related to inflation, in the long run Government borrowing is expected to for investments and not for revenue expenditure.
4. Due to higher fiscal spending, growth is expected to go up which may not take care of financial stability or inflation.