The RBI approach is going to be gradual tapering. The RBI Governor is saying that he does not want any suddenness and is ensuring that liquidity is going to be comfortable in the system at all times. “Saying, we do not want to rock the boat, there is a journey beyond the shore let there not be any concern on liquidity.” That should make financial markets happy and in fact we have seen a slight bump up after the policy announcement?
In essence it’s a
“main hoon na policy.” RBI will manage liquidity. They will add or deduct it as the case may be. RBI will be careful in inflation and is watching it and will take corrective action on the government’s borrowing programme. GSAP may not be there but OMOs will be there.
On interest rates and yield curve intervention, when needed, they will be there. Essentially RBI is giving the message that in the last 18 months we had done a great job. Trust us we will continue to do the same going forward. That will be music to financial markets.
