Aneesh Srivastava - CIO, IDBI Federal Life Insurance on the RBI Credit policy

Holding on was a stable move

India is going through a painful readjustment in Monetary & Fiscal Policy, where we feel that Fiscal policy has to take a lead. Recent hike in fuel price would lead inflation higher in near term & limits RBI's ability to cut rates, but over longer term it would help to bring some fiscal consolidation.

Right policy action taken by the government would create more elbow room for sharper rate action by RBI in future, provided inflation & inflationary expectations are under control.

Government has yet to take action to address supply side bottlenecks which is one of the reason for inflation. At the same time, imported inflation is something that we have little control, except controlling consumption. We also believe that RBI would remain generous in providing liquidity support till it reaches the stage where cutting rates is an absolute necessity.

Source : Equity Bulls

Keywords