The Hindu Business Line : Leaving room for future action

The thrust of the Credit Policy has been towards imparting greater flexibility in the financial markets by further development of the market infrastructure. While the Annual Policy has left the rates unchanged for now, we believe that with an overall hawkish stance, the Governor has left some room for further tightening depending on the evolving macroeconomic conditions.

Focus on inflation

Another key positive in this Policy is that the Governor has not taken any regressive steps to curb sustained capital inflows despite the fact that these inflows have been posing a tough challenge to the RBI's liquidity management.

Although not explicitly stated, the RBI appears to gradually move towards inflation targeting in the medium term, by stating a band of 4-4.5 per cent.

As such, we expect managing inflationary expectations would continue to receive greater monetary policy focus.

Overall, the policy has done well in maintaining a conducive environment for enabling domestic growth, while paving the way for greater global integration of the economy.

(The author is Chief Economist, Yes Bank.)

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