Icra said the revised GDP estimate is in line with farm sector outlook. The policy reinforces the feel-good factor that is clearly in evidence in the financial year 2004. In particular, factors that evoke such optimism on the feel-good factor include the good news on certain macro-fundamentals, it said.
IFCI Ltd chairman VP Singh said the policy was clearly for continuity with stability. The governor has kept his word, that he would not change the policy for the sake of change. Market expectations of a CRR or bank rate cut were unwarranted, he added, since the need is to raise credit offtake and lower the cost of credit. The policy signals a directional change with the help of technology and measures already enacted, like the Securitisation Act.
Rating agency Fitch stated that the policy stresses continuance of the policy framework and the initiatives on structural development will be positive for bond markets. It said that the policy has made a positive assessment of the macroeconomic environment. Importantly, GDP growth rate has been revised upwards and inflation expectation downwards. Coupled with comfortable and increasing foreign exchange reserves, adequate liquidity and stability in the financial markets, the stress continues to be on growth and a soft interest stance.
The policy contains several measures for progress on important structural issues. The RBI has commenced the review of the Liquidity Adjustment Facility (LAF) and will finalise revised guidelines after consultation with market participants.
While the policy may have disappointed bond markets by not containing the much anticipated rate cuts, it stresses the continuance of RBIs soft but flexible outlook. Importantly, the option of taking specific rate measures in response to market developments remains open to RBI.