All eyes on RBI as Monetary Policy Committee starts two-day meeting
The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, began its 2-day meeting on Tuesday amid experts saying that the central bank is likely to hold key rates even as the government is making a case for a lower interest regime citing low inflation.
India Inc is also pitching for a rate cut to boost GDP growth that fell to 7.1 per cent in 2016-17 from 8 per cent in the previous fiscal.
However, financial sector experts believe the Reserve Bank will likely maintain status quo at its second bi-monthly monetary policy review of the current fiscal to be unveiled on Wednesday as the central bank would like to gauge the impact of GST rollout on inflation.
"Given the inflation trajectory and as the liquidity is enough in the market, it is unlikely that there would be any rate cut this time. I think commentary of the policy will be benign," State Bank of India DMD and Chief Financial Officer Anshula Kant said.
Finance Minister Arun Jaitley had said inflation has been under control for long and is likely to remain so on the back of good monsoon and unlikely spike in oil prices.
"...growth and investment need to improve. These are indicators which are available. Any finance minister under these circumstances would like a rate cut, the private sector would like a rate cut. But then when you entrusted it with the MPC, I would rather wait for their decision," he had said.
The RBI may wait for the July 1 rollout of the GST and assess the impact of the new indirect tax regime on inflation before tinkering with the policy rates.
"I do not think the RBI will cut repo rate in the upcoming policy. They will wait for CPI data before taking a call. The tone of the policy is likely to be dovish," Union Bank of India executive director Vinod Kathuria said. The inflation data for July, to be released in August, will give an indication of the impact of Goods and Services Tax (GST) on prices.
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