RBI's monetary policy review by Mr. Mustafa Nadeem, CEO, Epic Research
Today's RBI Policy was, as widely expected by the market, neutral. Market has been expecting the same since the volatility was easily absorbed and markets remained at day's high post policy announcement. The neutral stance is very much consistent with the core objective of RBI that is to keep medium term inflation in check at 4%. Policy has of course revised its Inflation projection at 4.2-4.6% in second half of FY17-18. Inflation has changed its trajectory to upwards and seems to have tapered off the base effect in August.
The United States have expanded their revised GDP in Q2, The EURO Zone has currently read highest PMI in six years while Japan seems to be better stable at currently levels. It's a better policy decision because implementation of GST has adversely affected the manufacturing sector in short term, which would further shove the revival in investments. We expected the Third and Fourth Quarter to show some promising numbers on back of Festivals and adjustments to GST. Even then, We believe that RBI needs to keep some room for future measures and look at structural changes in Indian Economy. The headwinds from International Markets will of course be seen critically for any major rate cut ahead.