Tuesday, December 2, 2014

#RBI's Monetary Policy Review

RBI Governor Raghuram Rajan has kept key policy rates unchanged at 8.0 per cent. CRR remains at 4%.RBI has kept growth target for the current fiscal unchanged at 5.5%

Perspective on RBI Policy from Mr. Debopam Chaudhuri, Chief Economist, ZyFin Research:

"A high rate environment would be instrumental in delaying any evaporation in hot money as USA recovers, a risk accentuated further by India's low rating as an investment destination. Rupee would benefit too. However, the opportunity-cost relationship between this and the adverse impact on economic activity due to high borrowing costs appears to be lopsided.  Interest rate sensitive sectors like Infrastructure and Auto may be the first ones to feel the heat, since usually during an economic recovery, these sectors are expected to be the front runners."

CREDAI expresses disappointment as RBI maintains status quo on key rates.

C Shekar Reddy President CREDAI- National said," The RBI decision to keep the key rates unchanged will not help the real estate sector development. Presently the overall inflation is under control as expected by the RBI, the crude oil prices are also low, the overall business requires an upword momentum.  A reduction in policy rates at this juncture would have a significant impact in boosting the industry and facilitating growth. Even the housing & finance ministry are advocating that the interest rates should be brought down for the developers and end user to promote the mission “Housing for all”.  The real estate sector has been struggling with high cost of labor, material & funds along with the moderate demand over the last few months. There is a strong need to lay out clear policy and lower the cost of borrowing to help developers focus on development and increase the supply of homes. There is already a shortfall of 18.78 million units in the urban areas and is expected to gear up to meet the expected demand for housing of 30 million units by 2022 to ensure Housing for all. To achieve the mission ‘Housing for all’ a stimulus is required in the form of interest rate cuts, interest subvention and tax cuts to propel the demand and encourage supply for housing”