RBI Governor Shaktikanta Das is preparing to release the first monetary policy of the fiscal year 2024-25 on Friday, April 5. While the economy is displaying robust growth, inflation appears to be a sticking issue that may require addressing.
According to the latest estimate from India's statistics ministry, the GDP growth rate for the current fiscal year is 7.6%. Despite this encouraging increase, inflation is consistently above the RBI's objective of 4%.
Analysts anticipate the RBI Monetary Policy Committee (MPC) would keep the policy repo rate constant at 6.5% and retain the monetary policy stance of 'removal of accommodation'.
Aditi Nayar, senior economist at ICRA, feels that the upward revision in the NSO's GDP growth predictions, together with three consecutive quarters of 8%+ GDP expansion and a CPI reading of 5.1% for February 2024, point to a status quo on rates and stance in April 2024.
Amit Goel, Co-Founder & Chief Global Strategist, Pace360 stated, "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 it’s all-time high, it is unlikely that the RBI will change its stance to neutral."
While geopolitical tensions continue to threaten global economies, India has maintained a strong position and outperformed its peers. This can be attributable primarily 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.
While other wealthy countries elected to keep interest rates unchanged, Japan drew attention by ending its negative interest rate cycle.
