Growth, inflation outlook delicately poised: SBI chief

State Bank of India chairman Dinesh Khara said the growth and inflation outlook of RBI looked delicately poised even as the Omicron virus threat has put an element of uncertainty all around.

He said the announcement regarding the capital infusion in overseas branches without prior approval of RBI would bring in operational and seamless flexibility.

“The decision to review the payment landscape and further fine-tuning UPI transfer for small value transactions could act as an enabler of mass digitisation,” he said adding the clarification regarding the transition from LIBOR to ARR was also a welcome move.

Abheek Barua, Chief Economist, HDFC Bank, said the central bank did little to provide any forward guidance on the path of future policy rate increases.

He said though the RBI kept its inflation forecast unchanged at 5.3% for FY22, signalling that inflation to be more transient than permanent in nature, HDFC Bank expected inflation prints to surprise on the upside and average at 5.6% for FY22, driven by elevated input and fuel costs and as the base effect wanes off.

Dharmakirti Joshi, Chief Economist, CRISIL Ltd. said the MPC was taking cautious steps towards normalising policy as the Indian economic recovery remains uneven, with private consumption trailing pre-pandemic levels until the second quarter.

“The MPC was also comforted by the recent fall in crude oil prices and cuts in excise duties on petrol and diesel, which is likely to ease some pressure on inflation. That said, the evolving risks from the Omicron variant to growth-inflation dynamics need to be monitored,” he said.

The RBI may not have leeway to stand pat in the coming months, given two imminent risks: of persisting inflation, and the United States withdrawing monetary policy stimulus sooner than previously expected, he added.

“We expect the RBI to continue normalise its policy in a calibrated manner in the coming months, by hiking the reverse repo rate in February 2022 to reduce the gap with the repo rate to 25 basis points, followed by 25 bps hike in the repo rate in March 2022,” Mr. Joshi said.

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Printable version | Jan 20, 2022 5:35:22 PM |

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