FICCI, PHDCCI welcome the accommodative policy stance announced by RBI

NEW DELHI, 04 December 2020: Commenting on the RBI monetary policy statement announced earlier today, Dr Sangita Reddy, President, FICCI said, “It is heartening to see RBI confirming that it will maintain an accommodative stance till the time necessary for stabilizing growth on a firm footing. While the inflation trajectory has moved up, at this point in time re-energizing growth should get all the attention. There has been a substantial upgrade to the overall growth forecast for the second half of the current fiscal. This is encouraging but given the stress the economy had faced on account of COVID-19, we anticipate that policy support, both from the RBI and the government, will be required well into the next year.”

Allowing banks to tap into the TLTRO funds for extending credit to other stressed sectors in line with ECLGS 2.0 is a positive move and FICCI welcomes the same. Amongst the other regulatory announcements, the announcement to review the regulatory regime for NBFCs basing it on size, scale and risk profile is a notable development. FICCI NBFC Committee has been engaging with the central bank on this subject and we look forward to the draft circular that will be put out by RBI for public comments. Likewise, announcements pertaining to strengthening of the credit derivatives market and the corporate bond market are welcome and FICCI will offer its feedback on the revised guidelines once issued.

Digital payments is another area that came in focus in today’s policy. RBI has indicated that it will promote common minimum standards of security controls in the area of digital payments. This will improve consumer confidence. Additionally, the decision to allow upward revision in the limit from Rs 2000/- to Rs 5000/- for contactless card transactions and e-mandates for recurring transaction through cards and UPI would enhance customer convenience and FICCI Fintech Committee has been engaging in these areas with the regulator.

Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry, also appreciated the continued accommodative stance by the Reserve Bank of India (RBI) in this very difficult time caused by pandemic COVID-19.

The growth projections by the RBI, such as positive growth in H2 FY2021 and revised real GDP growth rate at (-)7.5%, are inspiring and will build confidence in the economic and business activities, going forward, said Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry in a press statement issued here today.

“These growth projections by RBI are very encouraging and in line with our expectations as  PHDCCI EBM Index (Economic and Business Momentum Index) released in November 2020 have projected that GDP growth will become positive from Q3 FY 2020-21 at around 0.1% to 2%,  around 2% to 4% in Q4 FY 2020-21 and the overall growth for the FY 2020-21 is expected to contract by not more than 7.9% on the back of various effective reforms undertaken by the government during the last six months to lift the economy from the daunting impact of COVID-19.”

“Rural resilience and pent-up of demand activity is supporting the economic activity at this juncture to rejuvenate it from the extreme lows caused by daunting impact of COVID-19”

“We appreciate that RBI’s Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 4% and maintain accommodative stance as long as necessary this year and next financial year to revive growth, mitigate impact of COVID-19 and keep inflation within the target. Reverse repo rate also remains unchanged at 3.35%,” Aggarwal further added.

“The GDP growth will become positive from Q3 FY 2020-21 at around 0.1% to 2% and around 2% to 4% in Q4 FY 2020-21 and the overall growth for the FY 2020-21 is expected to contract by not more than 7.9% on the back of various effective reforms undertaken by the government during the last six months to lift the economy from the daunting impact of COVID-19.”

“The series of stimulus announcements by the Government in last 8 months, totaling to around Rs 29.9 lakh crore, are highly appreciable and will go a long way in our fight against the impact of COVID-19 on trade, industry and economy.”

“At this juncture, increased spending on infrastructure will have multiplier effects on the economic growth trajectory by boosting private investments, creating new employment opportunities in the sectors such as steel, cement and power and demand creation in the country.”

“The planned Rs 111 lakh crore investment in the National Infrastructure Pipeline (NIP) has a great potential to boost the GDP growth of the country as correlation between the investment in infrastructure and economic growth is quite high.”

“Going ahead, we expect accommodative stance to continue at least in next financial year and there is further cut in repo rate if inflation comes down,” Aggarwal concluded.”