Monetary Policy- At Cross Roads

- By Mr. Vikram Kotak, Chief Investment Officer, Birla Sun Life Insurance

RBI has so far stayed behind the curve in rate normalization due to concerns over economic growth. However, with robust pick-up in demand, recovery in private capex, signs of improvement in credit growth and second highest inflation phase in the decade, we expect accelerated rate hikes going forward. RBI also faces the challenge of managing highest ever net government borrowing programme in the backdrop of rising private and consumer credit demand. All these will have significant bearing on policy decisions over the next one year.

It's going to defining moment for RBI to manage growth and Inflation tussle simultaneously without impacting other but in my view this time the focus should be around Inflation than growth because it is cause of concern that we see signs of higher inflation at such early stage of uptrend in Business cycle. It is likely to hike repo and reverse repo rates by 50bps each. Over the course of next one year, we are likely to see Repo rate, Reverse Repo rate & CRR rising by 100bps.

Disclaimer: The views expressed here are of the individual and not the company.

Source : Equity Bulls

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