Mumbai
Experts believe that the Reserve Bank of India (RBI) is unlikely to cut the benchmark interest rate in its upcoming monetary policy review, set shortly after the Lok Sabha election results. Despite inflation concerns, economic growth appears to be picking up, and the Monetary Policy Committee (MPC) may decide against a rate cut. The current repo rate has been 6.5% since February 2023.
The MPC, led by RBI Governor Shaktikanta Das, will meet from June 5 to 7, with the decision announced on June 7. The Lok Sabha election results will be revealed on June 4. Since the last rate hike in February 2023, the RBI has maintained the rate for six consecutive bi-monthly policies.
If the rate remains unchanged on June 7, it will mark the eighth consecutive time the RBI has kept the repo rate steady. Madan Sabnavis, Chief Economist at Bank of Baroda, noted that economic conditions have largely remained stable, with growth indicators like PMI and GST collections showing positive trends. However, inflation concerns persist, particularly due to the impact of the ongoing heatwave on vegetable prices.
Sanjay Nayar, President of Assocham, also expects the RBI to keep the repo rate unchanged, citing retail inflation above the 4% target. The government mandates the RBI to maintain CPI-based inflation at 4%, with a 2% margin. April’s CPI inflation was 4.83%.
Aditi Nayar, Chief Economist at ICRA, suggests that recent inflation data supports maintaining the current rates. Additionally, strong GDP growth in Q4 FY2024 diminishes the likelihood of a rate change before August 2024.
