Several experts predict that there will not be any change in the repo rate at the monetary credit and policy review meet by the Reserve Bank of India (RBI). This prediction comes amidst RBI’s intention of focusing on inflation control. Deliberations by the Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel have already started today. Key decisions by the committee are expected to be released once the policy meet gets over tomorrow.
The outcome of the meet is keenly expected by various stakeholders including the government, manufacturing sector, stock market, etc. The government is actively lobbying for an interest rate cut in order to put economic growth back on track. The manufacturing sector of the country is just recovering from the impact of demonetisation and GST reforms. A rate cut by the RBI will boost economic growth even further.
In the previous bi-monthly policy meet concluded in October 2017, the RBI kept the repo rate unchanged at 6%. Since the formation of the MPC under Urjit Patel in October 2016, the repo rate has been lowered twice. The most recent rate cut came in August 2017 when the RBI lowered the repo rate by 25 basis points.
According to recent data, inflation rate in India has reached a 7-month high of 3.58% in October 2017. The main reason for this inflation has been attributed to rising food and fuel costs in the country. The Reserve Bank wants to keep inflation under the 4% mark at least for the next few months. If the fuel prices go up in the future, inflation will increase too. Taking this into consideration, the RBI is expected to follow a conservative estimate even this time.
On the economic front, the country’s GDP growth has recovered to 6.3% for the second quarter of this fiscal year. After a dismal performance of 5.7% in the first quarter, the government desperately needed a rate cut to boost economic growth. With a conservative estimate at the policy meet even this time, it seems like the government has to wait a little longer to promote economic growth in the country.