BT Brainstorm: RBI may look at reverse repo rate hike in April, says Keki Mistry

Vice Chairman and CEO at India’s largest private lender HDFC Bank Keki Mistry said in his conversation with Business Today TV’s Aabha Bakaya during the BT Brainstorm Budget 2022 event that he believes that the Reserve Bank of India (RBI) can look at a hike in the reverse repo rate in the upcoming April policy and may look at raising repo rate in June. He added that this will depend on how the inflation numbers and oil prices remain over the next few months.
 
Mistry explained, “My sense in the April policy, they could perhaps look at the reverse repo rate hike and maybe June, look at repo hike or whatever else but that is purely a function of where the data spans out, what kind of inflation numbers we report over the next 3-4 months, what happens to oil prices, what happens on this whole Russia-Ukraine issue. So, there are so many macro factors today which are beyond us [and] where we can’t really envisage what’s going.”
 
He further says that it is important to understand that the RBI has been “fairly accurate” in their projections of inflation so far. The HDFC Bank VC and CEO further underscored that if the RBI believes that going ahead, inflation rates could go at around 4.5 per cent, and then in that scenario, there is no need to hike policy rates aggressively.
 
Mistry also had a word of advice for those who analyse Indian and US economies together. He expounded, “People compare India with the US. I think we are comparing apples and oranges. The US is a completely different market; inflation in US is 7.5 per cent.”
 
He added, “Inflation in the US was always very low whereas inflation in India, historically, was always a lot higher than the US and this is perhaps the first time in my full career over so many years where I am seeing that the inflation in the US I higher than in India. So naturally, the US will have to have a different policy—a much more aggressive policy in terms of raising rates.”
 
Mistry also said that the main focus of the Budget this year was the infrastructure and housing sectors as it will create more jobs. He went onto add that ~Rs 48,000 crore have been allocated towards the housing sector and some more allocation has been earmarked towards the infrastructure sector.
 
“No, I think it will be broad-based across turbots but it’s not going to be that everything is going to start from day one. To my mind, the bigger focus will be to start on infrastructure. Infrastructure and housing is what will create a lot of jobs,” Mistry said.
 
He further added, “That will be the starting point but that will, as I said earlier, lead to more jobs and more if jobs get created, demand in the economy will increase, then, it will kickstart all other sectors in the economy.” 

Mistry added that job creation will also help the affordable housing segment as this will provide cash in hand to the low and middle-income groups.

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