Amid expectations that GDP growth is picking up pace and inflation is manageable, the RBI’s high-powered rate setting panel on Wednesday began its 3-day brainstorming on the next set of bi-monthly monetary policy measures, including short-term… A sustained hold on the key lending rate was expected.
RBI left the benchmark policy rate (repo) unchanged in its last four bi-monthly monetary policies. It last raised the repo rate to 6.5 per cent in February, thus ending the interest rate hike cycle that began in May 2022 following the Russia-Ukraine war and subsequent high inflation in the country as a result of disruption in global supply chains. Hui.
RBI Governor Shaktikanta Das will unveil the decision of the six-member MPC (Monetary Policy Committee) on December 8.
On expectations from the MPC, ICRA Chief Economist Aditi Nair said the GDP data for Q2 2023-24 is significantly higher than the MPC’s previous forecast, and concerns continue over various aspects of food inflation, “We expect Amidst the fairly hawkish tone of the MPC policy document, it was put on hold in its December 2023 review.
According to Deutsche Bank Research, the RBI will likely raise its 2023-24 GDP forecast to 6.8 per cent from 6.5 per cent year-on-year, while keeping the CPI forecast unchanged at 5.4 per cent.
“RBI will keep the repo rate and stance unchanged, maintain tight liquidity and ensure short-term rates remain around 6.85-6.90 per cent, resulting in an ‘effective rate hike’,” it said.
The world’s fastest growing major economy
India has retained the tag of the world’s fastest-growing major economy, with its GDP growing faster than expected by 7.6 per cent in the September quarter due to booster shots from government spending and manufacturing.
Medical Technology Association of India (MTAI) director Sanjay Bhutani said the central bank’s recent MPC meetings have kept the policy rate unchanged in line with market expectations.
“We expect a similar outcome for this upcoming meeting. However, with the decline in inflation, there is a possibility of a reduction in interest rates, which could possibly happen as early as February-March 2024,” he said. A positive development for all sectors, especially capital and research-intensive industries such as the medical technology sector.
Retail inflation falls to four-month low of 4.87 percent in October
The government has ordered the central government to ensure that retail inflation based on the Consumer Price Index (CPI) remains at 4 percent, with a margin of 2 percent on either side.
Retail inflation fell to a four-month low of 4.87 per cent in October, mainly due to lower food prices. The Reserve Bank’s MPC in its October meeting projected CPI inflation at 5.4 per cent for 2023-24, down from 6.7 per cent in 2022-23.
HS Bhatia, managing director of Kelvon Electronics & Appliances, Daewoo India’s manufacturing partner, said the RBI’s monetary policy decisions will have a significant impact on the consumer durables industry.
“The industry is hoping that the RBI will keep interest rates stable or even reduce them slightly in the upcoming review so that consumers get adequate purchasing power,” he said.
Parijat Aggarwal, Head – Fixed Income, Union Asset Management Company, said US 10-year bonds have recovered meaningfully from the peak in line with incoming data and the central bank narrative, and concerns about oil prices have also eased. Has happened.
“Although the MPC will focus on bringing the inflation target to 4 per cent, we expect the MPC to keep the rates and stance on hold,” Aggarwal said.
The MPC consists of three external members and three RBI officials. The external members on the panel are Shashank Bhide, Ashima Goyal and Jayant R Verma. Apart from Governor Das, the other RBI officials in the MPC are Rajiv Ranjan (executive director) and Michael Debabrata Patra (deputy governor).
