Dont want to rock the boat, when shore is near, what does RBI Governor meant with respect to economic recovery?

The Indian markets on Friday cheered trading near the day’s high level, minutes after the Reserve Bank of India’s Monetary Policy Committee decision were out. RBI Governor Shaktikanta Das in his commentary made a slew of positive announcements for the earliest economic recovery.  

Before concluding his address, the RBI Governor Das mentioned the reason why the MPC has decided to keep the rate unchanged and maintained the accommodative stance, while being bullish on the overall economic recovery, similarly, well placed liquidity and growth situation at present.

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“Our entire approach is one of gradualism. We don't want suddenness or surprises. More so, we realise as we approach the shore, we don't want to rock the boat. Because we realise there are lives and journeys beyond the shore, so we don't want surprises.” The RBI Governor said.  

Analysing the RBI Governor’s view, Geojit Financial Services Chief Investment Strategist Dr. V K Vijayakumar said, “Emphasizing that ‘we don't want to rock the boat as we approach the shores’ RBI Governor Das declared continuation of the accommodative monetary stance ‘as long as necessary.” 

“The logic for the continuation of the accommodative stance is that while growth is reviving, it is uneven and depends on continued monetary support,” he added. 

“As we expected, the RBI did not shock the system with a reverse repo hike, and the policy is well used as a lever to prepare markets for a gradualist approach toward normalisation through both communication and action,” Emkay Global Financial Services Lead Economist Madhavi Arora said. 

She further added, “We do not see the RBI deploying any direct tightening tools like MSS, CRR hikes, FX swaps, or outright OMO sales in the coming quarters. Instead, we expect the RBI to let natural stabilizers like increased credit offtake and high CIC etc. to reduce the liquidity surplus.’’ 

The RBI’s MPC has kept the October policy’s rate unchanged to 4 per cent on the back of the evolving macroeconomic and financial conditions. The committee voted unanimously to maintain the status quo and by a majority of 5 to 1 to retain the accommodative stance. 

The benchmark indices, Sensex had reclaimed its 60000-mark, while Nifty50 was trading near 18000-level during the early morning trade. Similarly, the banking and financial stocks were trading mute.