DELHI: The Reserve Bank of India (RBI) increased the repo rate on Tuesday. If the rise in repo rates does not lead to an increase in bank rates, it is a temporary measure to track inflation. If inflation goes down, RBI will, hopefully, reduce rates. If bank rates rise, it will impact the industry and economic growth will suffer a setback. Going forward, I hope RBI will not increase rates.
When former RBI governors met recently, there was a consensus that the central bank should focus on growth and stop focusing on inflation.
With Tuesday's announcement, the RBI governor has surprised many. During every policy announcement, markets expect RBI to lower rates or maintain status quo. Markets always believe in the growth story.
There is a need to lower rates to stimulate demand in the economy. RBI cannot just announce the policy; it should explain why it is increasing rates. Everybody is accountable to the nation.
As far as real estate sector goes, it is equally dependent on the economy. If the economy is impacted, this sector will also go down.