The monetary policy statement indicates that the Indian economy continues to progress on the expected path, with improving growth indicators and inflation contained within the targeted range. The central bank has expressed strong confidence in the government’s commitment to fiscal consolidation. As the impact of monetary policy measures taken so far play out in terms of bank funding costs, lending rates are expected to continue to moderate. Overall, macro-economic conditions are conducive for an improving growth trajectory as the various policy measures announced by the government take effect.

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The 50 bps reduction in the policy rate by RBI is a precursor to reduction in interest rates in the economy which will provide a strong impetus to growth. The progressive liberalisation of financial markets is a very welcome step. The policy statement not only demonstrates consistency in RBI’s approach but also explicitly recognises the steps taken by the government in controlling inflation. It is a strong and forward-looking statement that recognises India’s inherent strengths and complements the government’s measures to take the country to a sustainable high growth trajectory.

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