The RBI is likely to continue with an "accommodative" policy stanceHighlightsMonetary Policy Committee seen holding key rates in today's statement Consumer inflation has worsened to highest since July 2014 Any action on repo rate to be data-dependent, say economists The Reserve Bank of India (RBI) will release its sixth bi-monthly policy statement of current fiscal year at 11:45 am today, following a three-day meeting of its Monetary Policy Committee.
The six-member Committee headed by RBI Governor Shaktikanta Das is widely expected to maintain the status quo on key lending rates, amid economic slowdown and consumer inflation staying well above the RBI's comfort zone.
Today's statement will also be the first after the presentation of Union Budget, in which the government outlined huge packages for farming and infrastructure, but only gave a small cut in personal taxes and provided no new incentives for the beleaguered financial and housing sectors.
The RBI is likely to continue with an "accommodative" policy stance without reducing the repo rate - the key interest rate at which it lends short-term funds to commercial banks.According to a poll of economists by news agency Reuters conducted before the Budget announcements, the RBI is expected to keep the repo rate unchanged until at least October, when it is seen resuming its easing path.Consumer inflation, or the rate of increase in consumer prices, worsened to 7.35 per cent in December - its highest level recorded in more than five years - primarily driven by food prices.According to CARE Ratings chief economist Madan Sabnavis, consumer inflation appears to have peaked for the time being and there is scope for further easing of repo rate by 25-50 basis points going forward; however, any such move will be data-dependent.The RBI is forecast to next cut rates by 25 basis points to 4.90 per cent in the October-December quarter, though some analysts reckon the central bank will keep rates on hold for longer.The Monetary Policy Committee lowered the repo rate by 135 basis points over five consecutive bi-monthly reviews last year, before surprising the markets in December by leaving the policy repo unchanged at 5.15 per cent due to growing concerns over inflation.The RBI is mandated to keep the headline inflation rate within the broad range of 2-6 per cent while it targets medium term inflation at 4 per cent levels.India's economy is forecast to grow 5 per cent in the year ending in March - its weakest pace in 11 years.
The economy has, however, recently shown signs of recovery.According to the findings of a private survey, manufacturing activity expanded at its quickest pace in nearly eight years in January with robust growth in new orders and output.
Activity in the dominant service industry accelerated in January at the fastest pace in seven years on strong domestic demand.Although the budget proposals are widely expected to provide some support to growth over the longer term, some economists say the measures are insufficient to provide an immediate boost to the economy which is staring at its worst expansion rate recorded since the 2008-09 global financial crisis.