RBI policy: Status quo in repo rate surprises experts

The Reserve Bank of India (RBI) announced a pause in the key policy repo rate, which stands at 6.50 percent, on October 5.

The decision was taken after a three-day meet of the six-member Monetary Policy Committee (MPC) chaired by RBI Governor Urjit Patel.

Five of the six members in the MPC voted in favour of status quo.

Reacting to the move, Subhash Chandra Garg, Secretary, Department of Economic Affairs tweeted that the Government welcomed the decision. "Government’s assessment of inflation is in line with the MPC’s assessment. We believe growth should turn out to be higher than that projected by MPC," Garg tweeted.

Government welcomes MPC statement and decision to keep the rates unchanged. Government ‘s assessment of inflation is in line with the MPC’s assessment. We believe growth should turn out to be higher than that projected by MPC.

— Subhash Chandra Garg (@SecretaryDEA) October 5, 2018

Ajay Srivastava, Chief Executive Officer at Dimensions Consulting said that he was in "absolute disbelief."

"Are they in the same zone as we are in? The country is hurtling into a recession. There is a bigger crisis than inflation," Srivastava said. Stating that the regulators need to realise that "stock market is lifeline for economy", Srivastava said that there will be no GDP growth if the "markets react as they are reacting now."

"I don’t know what the thinking is. They don’t have any idea of the ground situation… this is not going the right way," Srivastava added.

State Bank of India's Managing Director and Chief Financial Officer  Anshula Kant said that the decision was "not on expected lines." She, however, said that the central bank cannot be faulted for being cautious. "But the timing might be wrong," Kant said.

Amandeep Singh, Fixed Income head at UTI AMC, said that the policy came as a surprise.

"At current juncture, the concerns have not really gone away. We will wait and watch," Singh said.