Financial experts anticipate that the Reserve Bank of India (RBI) will likely keep the key interest rate unchanged in its upcoming April meeting, prioritising efforts to curb inflation towards the 4 per cent target. Following a surge in GDP growth to nearly 8 per cent, concerns over economic growth have eased, leading to this projection.
The Monetary Policy Committee (MPC), chaired by RBI Governor Shaktikanta Das, is scheduled to convene from April 3 to April 5, with the decision to be announced on April 5 (Friday). This meeting marks the initiation of the first bi-monthly monetary policy for the fiscal year 2024-25, with a total of six such meetings slated for the year.
Notably, the RBI has maintained the repo rate at 6.5 per cent since its last hike in February 2023. Madan Sabnavis, Chief Economist at Bank of Baroda, expressed expectations for the MPC to uphold the current rate and stance, citing lingering inflation concerns, particularly regarding potential food inflation shocks.
Aditi Nayar, Chief Economist at Icra, echoed similar sentiments, pointing out the recent upward revision of GDP growth estimates and consistent CPI prints above 5 per cent. Nayar suggested that the policy stance is unlikely to change before the August 2024 MPC review, pending clarity on monsoon outcomes, sustainability of growth momentum, and decisions from the US Federal Reserve regarding interest rates.
Jyoti Prakash Gadia, managing director at Resurgent India is expecting that the RBI will keep the repo rate unchanged, with a continued wait and watch approach for the first quarter of the new financial year. "While the head line inflation is tapering off the food inflation is volatile and along with fuel inflation they are still subjected to local and global supply chain uncertainties and therefore RBI is expected to monitor the situation further till the head line inflation moves closer to 4 per cent. The continued close watch on inflation is essential from the current overall scenario perspective," Gadia said.
On liquidity front, the RBI is expected to maintain a balance taking into account the higher level of spending during the elections and the Rabi crop harvest season starting shortly. Overall a pragmatic approach is the order of the day at the current point of time, he pointed out
The anticipation surrounding the RBI's decision stems from recent global developments, including Switzerland becoming the first major economy to cut interest rates and Japan ending its eight-year period of negative interest rates regime. Additionally, observers note that central banks in major economies like the US and UK are adopting a wait-and-watch approach regarding interest rate adjustments.
Analysts and market participants eagerly await the RBI's announcement on April 5, which is expected to shed light on the central bank's monetary policy direction amidst evolving economic conditions.