The Reserve Bank of India (RBI) is likely to maintain the key interest rate unchanged in April, prioritising the reduction of inflation to the 4 per cent target, following alleviated concerns about economic growth with GDP estimated at nearly 8 per cent, experts said. The Monetary Policy Committee (MPC), the Reserve Bank’s rate-setting panel, may draw insights from major economies like the US and UK, currently adopting a wait-and-watch stance on interest rate adjustments.
While Switzerland has initiated interest rate cuts, Japan recently terminated its eight-year period of negative interest rates. The MPC, headed by Reserve Bank Governor Shaktikanta Das, is slated to convene from April 3 to 5, with the decision scheduled for announcement on April 5.
This marks the inaugural bi-monthly monetary policy for fiscal year 2024-25, with six MPC meetings scheduled throughout the fiscal year, commencing on April 1, 2024. Since February 2023, the Reserve Bank has maintained the repo rate at 6.5 per cent across its last six bi-monthly policies.
“Given that inflation is still in the 5 per cent range and there is a possibility of future shocks on the food inflation front, the MPC is expected to maintain the status quo on rate and stance this time,” said Madan Sabnavis, Chief Economist, Bank of Baroda.
He further said there can be a revision in the GDP forecast, which will be eagerly awaited.
“The growth in FY24 has been much better than expected, and hence, the central bank will have less concerns here and will continue focusing on targeting inflation,” Sabnavis added.
India posted 8.4 per cent economic growth in the December quarter of the fiscal 2023-24. The National Statistical Office (NSO) has revised GDP estimates for the first and second quarters of this fiscal to 8.2 and 8.1 per cent from 7.8 per cent and 7.6 per cent, respectively.
Aditi Nayar, Chief Economist, Icra, said the upward revision in the NSO’s GDP growth estimates for the first and second quarters of fiscal 2023-24, three successive quarters of 8 per cent plus GDP expansion and the CPI print of 5.1 per cent for February 2024, suggest status quo on rates and stance in the upcoming April meeting.
(With inputs from agencies)