RBI has played conservative in announcing a rate cut of just 25 points. There is no wonder that RBI in the second biomonthly monetary policy announcement by the Reserve Bank of India. A 25 basis point cut was expected and the same was delivered by the RBI. Whether a deeper 50 basis point cut was necessary the question to be addressed.
With the inflation growth of 4% that gave a sharp slow down in the economy that was set up by RBI but it chose to play conservative. Maybe the idea is to keep the rate cut constant for the next policy. If the economy fails to recover till August then the onus will shift from Finance Ministry to the RBI. By the lastest policy it is very clear that RBI is focused on growth.
The statement made by Shaktikanta Das the RBI governor that change of instance to accommodative from neutral is to ensure systematic liquidity which will remain a priority for central bank that is not only listening to the demands of key stakeholders in the economy , but also acting on it. There are tremendous expectations from the government over the next round of reforms backed by it is a strong mandate. The onus is now on the budget that is to be on July 5 to unleash the norms again in the economy.
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