The Reserve Bank of India (RBI) began its bi-monthly monetary policy review meeting on Wednesday amid expectation that the regulator will opt to continue a pause on the short-term key lending rate owing to the increasing pace of GDP growth and inflation settling at manageable levels. 


The meeting will last for three days and is being headed by the RBI Governor, Shaktikanta Das. The Governor will reveal the decision of the six-member Monetary Policy Committee (MPC) on December 8.


In the last four bi-monthly monetary policies, the RBI opted to leave the benchmark policy rate (repo) unchanged. The regulator increased the repo rate earlier in February to 6.5 per cent, putting an end to a series of rises in the rate since May 2022. This development took place in the aftermath of the Russia-Ukraine war and the following disruptions in the global supply chain which ended in increasing inflation in the country. 


Regarding the expectations from the meeting, Aditi Nayar, chief economist, ICRA, noted, “With the GDP data for the second quarter of 2023-24 appreciably higher than the MPC's last forecast, and continuing concerns on various aspects of food inflation, we expect the MPC to pause in its December 2023 review, amidst a fairly hawkish tone of the policy document,” reported PTI. 


Meanwhile, Deutsche Bank Research said that the RBI is expected to potentially increase its GDP forecast for the 2023-24 fiscal year to 6.8 per cent on a year-on-year (YoY) basis, against the earlier prediction of 6.5 per cent. However, the CPI outlook is expected to remain unchanged at 5.4 per cent. The research agency said, “RBI will likely keep repo rate and stance unchanged, persist with tight liquidity and ensure that short-term rates remain around 6.85-6.90 per cent, resulting in an 'effective rate hike.”


Sanjay Bhutani, director, the Medical Technology Association of India (MTaI) said, “The central bank's recent MPC meetings have kept the policy rate unchanged, aligning with market expectations. We anticipate a similar outcome for this upcoming meeting. However, with inflation on a downward trend, an easing of interest rates could be on the cards, potentially occurring as early as February-March 2024, he said, and added this would be a positive development for all sectors, particularly capital and research-intensive industries like the medical technology sector.”


Notably, India maintained its status as the world’s fastest-growing major economy with its GDP growing at the rate of 7.6 per cent in the September quarter, bypassing expectations. 


Another analyst, Parijat Agrawal, head - fixed income, Union Asset Management Company, said, “The US 10-year bond has corrected meaningfully from the peak in line with the incoming data and the central bank narrative, and concerns around oil prices too have reduced. Although MPC will emphasise on bringing inflation to the 4 per cent target, we expect MPC to remain on pause on rates and stance.”


The MPC includes three external members and three RBI officials. The external members on the panel are Shashanka Bhide, Ashima Goyal, and Jayanth R Varma, while the three officials include the RBI Governor, Rajiv Ranjan (executive director), and Michael Debabrata Patra (deputy governor). 


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