RBI Governor Shaktikanta Das is gearing up to announce the first monetary policy of the fiscal year 2024-25 on Friday, April 5. While the economy is showing strong growth figures, inflation seems to be a sticking point that might need attention.
The latest update from India's statistics ministry indicates that the GDP growth rate for the current fiscal year stands at 7.6 per cent. Despite this positive growth, inflation remains persistently above the RBI's target level of 4 per cent.
Analysts believe that the RBI Monetary Policy Committee (MPC) is likely to keep the policy repo rate steady at 6.5 per cent and maintain the monetary policy stance of 'withdrawal of accommodation'.
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Aditi Nayar, chief economist, ICRA believes that the upward revision in the NSO's GDP growth estimates, along with the three successive quarters of 8 per cent plus GDP expansion, and the CPI print of 5.1 per cent for February 2024, suggest a status quo on the rates and stance in April 2024.
"We expect the RBI MPC to keep the policy repo rate unchanged at 6.5 per cent. After a 25 bps hike in February 2023, the rate has remained unchanged at this level over seven straight MPC meetings. With the rise in crude oil prices and the USD INR recently touching its all-time high, it is unlikely that the RBI will change its stance to neutral," said Amit Goel, Co-Founder & Chief Global Strategist, Pace360.
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While geopolitical situations continue to daunt global economies, India has remained in a strong position and outperformed its counterparts. This can largely be attributed to the government's capex push.
"We expect the RBI to take comfort from declining core inflation, slightly soften its hawkish forward guidance, but remain cautious given the upside risks to food inflation and the repricing of the Fed funds rate easing path," he added.
Globally, while most developed countries decided to keep their interest rates steady, Japan caught attention by putting an end to its negative interest rate cycle.
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