By:- Mr. Rajkumar Singhal, MD & CEO at Quest Investment Managers
“The RBI MPC has decided to keep the policy rate unchanged at 5.25%, and continue with the ‘neutral’ stance, which enables the central bank to respond appropriately to the developing macroeconomic conditions. The MPC has noted that despite persistent global economic uncertainty, domestic economic activities have shown brilliant growth, due to which India still remains one of the fastest-growing economies in the world. It is of the view that, overall, Indian economy performed better than expected in Q1. The central bank is optimistic about the growth prospects this fiscal year (FY27), which doesn’t require an urgent policy action. Though there is some haziness and strong external headwinds, healthy Q1 results indicate higher-than-expected performance in the manufacturing sector – which is corroborated by the expansionary PMI – robust service sector activities, buoyed discretionary spending, higher consumption, and steady investment activity on the back of higher government spending. As a result, RBI is expecting a faster turnaround in FII/FPI activities in the coming months – as seen in July – which will give an impetus to India’s capital markets. Global economic conditions have become increasingly unstable, global growth is projected to be softer, and inflation forecasts are higher this year compared to last year. Crude, currency, and financial markets may remain volatile, resulting from the West Asia conflicts. Therefore, the RBI panel thinks that there is a need for more clarity to emerge, especially regarding inflation, before taking any policy action. Additionally, the central bank’s continued efforts to reform the Urban Cooperative Banks are to be seen as a significant step to bring transparency in the banking sector, improve credit quality and enhance credit growth in the country.”