The RBI’s announcement today to keep the policy rate unchanged was on expected lines. The MPC has not viewed the recent growth slowdown as being structural in nature and is expecting it to be transient with growth prospects likely to improve over the medium term.
The MPC has also reiterated the need to support investment activity and the gamut of measures that are being undertaken by the government will help this process significantly. By retaining the focus on inflation targets, this policy ensures that the confidence of the investors on the Indian macroeconomic indicators will continue.
Further policy action will be contingent on the evolution of the output gap and its impact on the inflation trajectory.
