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RBI Monetary Policy focus on growth-orientation of construction sector

The Monetary Policy Committee has kept policy rates for construction unchanged once again at its bi-monthly review. The Repo rate has been maintained at 4% while the reverse repo rate is at 3.35%. Policy stance has been maintained at accommodative by the central bank in an effort to maintain liquidity in the system as the country continues to recover from the covid-19 pandemic and its economic implications. Anticipating some impact on the economy of the second covid-19 wave, RBI has trimmed the growth forecast for Financial Year 2021-22 to 9.5% from the earlier 10.5%. The central bank has stepped up its efforts to ensure liquidity in the system with another GSAP worth Rs 1.2 lakh crore planned for this fiscal year. 

“By keeping the repo rate unchanged, the central bank has taken the step towards the right direction in current circumstances. With this, the policy stance there is a growth-oriented approach and is much needed as the second wave ebbs”, says Mr. Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani.

He further states that that while the construction sector has been severely impacted in the second lockdown, the problems have been aggravated with a considerable rise in the cost of raw materials such as steel and cement.  In such a scenario, an unchanged repo rate makes more sense than an increased one which would have added more pressure on the sector. However, we also need to be mindful of the impact on prospective home-buyers due to the uncertain conditions. These set of buyers are apprehensive in coming ahead and have instead chosen to wait to buy a home. There was a need for stimulant policy measures that would enhance liquidity for the sector, ease credit provisions and increases buyer’s confidence. Any announcements in these forms would have been much appreciated.

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