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RBI policy: Intention is Growth

Debates are on. The RBI policy is clear. Growth is the need of the hour. Inflation
was a major concern, and still remains so. But reserve bank of India in it's
monetary policy only hiked CRR rate. The cash reserve ratio will become 5.75% from
the present 5 percent. All other key rates repo, reverse repo and bank rates will
remain the same. CRR rate hike will be implemented in two phases. These all shows
that growth is the main target. RBI reversed it's growth forecast to 7.5 percent
for the present 6 percent. Which will be an attainable figure. UPA government also
made it clear earlier that India will record above seven percent growth rate in
2009-10.
Food inflation was a major concern for the central bank. They now predict that
inflation would come down by march. In February end, the full fledged budget by
the UPA second will be tabled. Which will be a road map for the country in the
path of progress. It seems everyone believes that inflation can be tamed without
disturbing growth. As the RBI governor said now we have to look for consistent
measures.
On the global front giants like US and China are controlling their banks with
tight measures. Recently China increased bank rates also. RBI policy review came
on the wake of US presidents remark on outsourcing. As expected he made his stand
clear that he is against outsourcing. When outsourcing stops all IT and IteS
companies in India will face difficulties. This would adversely affect India's
economic growth. Inflation is the major reason of worry among common man.
Government and RBI had taken so many steps to curb inflation but now also it
remains untamed.
Indian corporates recorded decent growth figures in the quarters so far. One more
quarter is left. It is believed that they would do better in the fourth quarter
also. Agricultural sector is the most under performing now. IT and enabled
services contributed large to India's growth story in the past decade. Now a sea
change is going to happen in this sector. In the coming budget also it shuld be
great concern. Otherwise we will see another wash over in the IT sector.
Indian indices tanked for the past two weeks mainly concerns of RBI policy review.
Banking stocks witnesed huge selling pressure due to fear of a rate hike. After
the review a big amount of money will be wiped out from the market. Indian market
reacted fiercely to the policy changes at first. But then indices bounced back.
Experts believe that till union budget there will be volatility in the Indian
stock market. In the short term we can expect some buying pressure too. Beaten
down banking stock counters are filled.
In short RBI monetary policy aims at consistent growth. It ensures that steps
would be taken to tackle fiscal deficit. As feared the RBI policy change was not a
bad one. It's clear that the RBI intention is to maintain a decent growth rate.
Coming budget will follow RBI stand on growth.

Pramod Thomas.