The RBI Monetary Policy – Cautious But Positive

By Accommodation Times News Service

By Anuj Puri, Chairman & Country Head, JLL India

The monetary policy announced today indicates that the RBI is of keeping a close eye on inflation rather than facilitating growth just as yet. This makes sense. Globally, emerging markets (including India) continue to remain vulnerable from decisions by US Federal government on withdrawal of stimulus, as well as geopolitical tension in the Middle East – which could impact crude oil prices.

In India, leading indicators such as the monthly Industrial Production and Purchasing Managers’ Index (PMI) have provided early signals of strengthening corporate sales and business flows. The benign outlook on global non-oil commodity prices and still-subdued corporate pricing power should all support continued disinflation, as should the recent government measures to improve food management.

However, the RBI has deemed it premature to conclude that future food inflation and its effects on broader inflation can be discounted. Also, the government is currently constrained by high deficit and its ability to spend is therefore restricted.

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