India still better investment destination; debt as an asset class is also looking lucrative now

Recently, the globe went through an international banking crisis. I covered the reasons behind this crisis situation in my previous article.

In that context and especially in the context of the failure of SVB Bank in San Francisco, the 16th largest Bank in the US, the current policy outcome of a pause in rate hike sounds to be very apt.

The Indian banking system remained sound and healthy during the current phase of extreme global uncertainties.

The global economy is now confronted with serious financial stability challenges arising from the recent liquidity crisis in the banking sector in some advanced economies.

In India, the focus of RBI as a regulator for the financial sector is now more on identifying the root cause of vulnerabilities, rather than dealing with the current situation.

RBI also acknowledges that the Indian banking system remains sound and healthy, with strong capital and liquidity positions, improving asset quality, better provisioning coverage along with improved profitability.

The Indian regulator remains committed to keeping a close eye on asset-liability mismatch amid rising interest rates.RBI believes that the impact of 250 bps repo rate hikes in the last 11 months is still playing out and will help to keep inflation under control. Overall, the policy outcome is supportive of growth.

The central bank has continued to maintain its earlier stance of – “Withdrawal of accommodation while supporting growth”.

The Monetary Policy Committee (MPC) has decided to remain focused on the calibrated withdrawal of accommodation to ensure that inflation progressively aligns with target without hampering growth.

The recent war between Russia & Ukraine led to inflationary conditions across the globe due to rising oil & commodity prices & higher logistic costs.

To control these inflationary conditions, advanced countries started raising interest rates after a long period of very low-interest rates.

India was also not excluded from these inflationary pressures. RBI had also to start by raising interest rates in line with global central bankers to control Inflationary pressures which impact the overall population of the country.

Growth:

The full-year GDP growth estimate for FY24 is revised to 6.5% from an earlier estimate of 6.4% RBI noted that India’s growth remains resilient as reflected in healthy expansion in industrial activities like IIP, growth in core industries, etc. along with robust services activities visible in passenger traffic, e-way…