RBI repo rate cut coming? Market full of expectations as Narendra Modi hints focus on growth

To boost growth and make available greater liquidity in the market, experts are expecting some amount of rate cut from RBI Governor Shaktikanta Das, when unveils RBI Monetary Policy Review next month. Experts say RBI rate cut is need of the hour as the stage is set for developing the Fixed Income and Debt Derivatives market to drive growth for the medium to long term. Notably, Narendra Modi government is likely to make a major push to boost the economy.

Balu Nair- Interim CEO at Metropolitan Stock Exchange said, "The mandate offers a clear vote for policy continuity. Markets will respond with lower volatility and higher volumes, especially in the indexes. The RBI  Governor can now pursue the growth agenda unfettered. He has been remarkably prescient with both his Dollar Swap and in calling for exotic derivatives. The stage is now perfectly set for both. The stage is equally set for developing the Fixed Income and Debt Derivatives market and drive growth up by at least 3 percentage points up for the medium to long term."

Arun, Chief Economist at Dun and Bradstreet said, “A stable government and continued policy thrust are two specific pre-requisite criteria for a sustainable growth trajectory. If the intended policy measures are well conceptualized, target oriented and executed with efficiency, it can produce the desired result. The new Government at Centre will have to face the challenges that are inhibiting the current growth momentum and brace the economy from unavoidable external challenges. Uplifting the domestic demand and resolving the issues in the strategic sectors like aviation, power and banking and non-banking financial companies becomes imperative as risks from slowing global economic activity and trade can be difficult to circumvent." 

He said that the demand is becoming broad-based with softer momentum in growth visible in some of the high-frequency indicators of rural and urban consumption. New investment from the private sector has not picked up and the fiscal constraints limit government spending. With both demand and investment slowing down, the government might have to re-evaluate the implementation of its policy agenda and adjust its policy priorities to accelerate growth in the near term. Given that the current government is well versed with the areas of improvement, it will be advantageous compared to a new government which will frame its new set policy priorities from the start.