RBI Monetary Policy Committee meeting outcome drew filmy responses from fund managers. As RBI Governor Shaktikanta Das delivered another rate hike, taking the repo rate to 6.25%, he emphasised that the worst of inflation is behind us, but we cannot be complacent. By retaining the policy stance at ‘withdrawal of accommodation’, underlining that the policy rate adjusted for inflation is still accommodative, and stating that “the battle against inflation is not over”, Governor Das continued to talk hawkish. Reacting to the MPC outcome, Lakshmi Iyer, CEO – Investment Advisory, Kotak Investment Advisors Ltd, tweeted, “RBI seems worried on Inflation. Uncertainty remains.. reminds me of the dialogue from Drishyam 2. ‘Sawal yeh nahi ki aap ki aankhon ke samne kya hai, Sawal yeh hai ke aap dekh kya rahe ho..’

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Kotak Mahindra AMC’s Managing Direct Nilesh Shah also had a filmy take on the policy statement. “The RBI has given a “Main Hoon Na” (we are there ) policy, reassuring the market. In a world where central banks are fighting to regain credibility, the RBI stands tall managing conflicting objectives of growth and inflation admirably. A data-driven RBI will keep on playing balls on merit and continue to keep the growth scoreboard moving with inflation under check,” Shah said.

Note that RBI Guv in his post-policy address clearly stated the RBI MPC focus is on withdrawal of accommodation, the central bank is ready to inject more cash, if needed. ” RBI is ready to inject additional cash through Liquidity Adjustment Facility (LAF) operations if the need arises,” Das said. 

Shaktikanta Das highlighted that against the backdrop of geopolitical tensions, global uncertainty, and a slowdown in global growth, India’s growth story is a stand-out. However, inflation continues to be sticky and further calibrated actions are likely by the central bank. Going forward, the inflation trajectory is expected to be shaped by both global and domestic factors. Reigning-in inflation and bringing it below the top end of the band and then subsequently further down is RBI’s main focus. However, this will be done while supporting growth.

According to the RBI MPC statement, robust and broad-based credit growth and the government’s thrust on capital spending and infrastructure should bolster investment activity. The consumer confidence is improving. However, the economy faces accentuated headwinds from protracted geopolitical tensions, tightening global financial conditions and slowing external demand. Taking all these factors into consideration, the real GDP growth for 2022-23 is projected at 6.8%, with risks evenly balanced. Governor Das stated that the impact of monetary policy measures undertaken needs to be watched going forward.

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In MPC’s view, further calibrated monetary policy action is warranted in order to keep inflation expectations anchored, break the core inflation persistence and contain second-round effects, so as to strengthen medium-term growth prospects. Amid global headwinds, hostile international environment, the Indian economy remains resilient, drawing strength from its macroeconomic fundamentals. “Our financial system remains robust and stable,” Das said, adding that banks and corporates are healthier than before the crisis. Bank credit is growing in double digits for 8 months now, and India is widely seen as a bright spot in an otherwise gloomy world.