The Reserve Bank of India that is meant to drive the demonetisation, is itself not clear about how it would play out for growth, lending rates or even inflation. That is how ASSOCHAM Preisdent Sunil Kanoria reacted to Wednesday's RBI review that left the key monetary policy rate untouched.
This was the first such review since November 8 when Prime Minister Narendra Modi announced that he had done away with currency notes of Rs 500 and Rs 1,000 denominations.
“By maintaining a status quo on the policy rates, the Reserve Bank of India has defied a widespread expectation of at least a 25 basis points cut in the interest rates, but the industry and the trade expected a little more clarity from the central bank on the time line for the demonetisation disruption to end,” the trade body maintained, inferring this as things seeming to be in a state of flux.
What is, however, a matter of consolation is that even if there had been a cut in interest rate, it would not have made much of difference to the credit offtake . With industry being over-leveraged and the consumer demand remaining tepid on account of demonetisation, credit offtake is in any case dropping.
Besides, the RBI has sounded a word of caution when it comes to the inflationary outlook even as it hopes to stick to the target of five per cent CPI inflation by the end of the fourth quarter of 2016-17.
“It is apparent that all energies are being utilised to deal with the demonetization issue and things can get clearer only after normalcy is restored by way of remonetisation of the currency for the trade and industry to get back to shape,” the chamber said. It also urged the central bank to keep a close eye on the rupee rate, outflows from the capital market and the developments in the US.
