(LiveMint)
One doesn’t need to be a soothsayer to predict that the Reserve Bank of India (RBI) will keep the repo rate unchanged at the meeting of its monetary policy committee (MPC) on 4-5 April, the first such meeting in the new fiscal year. Any change in the stance of the monetary policy is also highly unlikely. In its last review in February, the MPC left the policy rate unchanged at 6% and the stance remained neutral but the tone of the policy was cautious. It took the decision in favour of no-change in the repo rate with a 5-1 vote, with Michael D. Patra reiterating his call for a quarter percentage rate hike and others—Chetan Ghate, Pami Dua, Ravindra H. Dholakia, Viral V. Acharya and Urjit R. Patel—voting for status quo. I will not be surprised if it turns out to be a unanimous decision this time.
The February meeting took place against the backdrop of fiscal slippages, rising oil prices, shooting US treasury yields and pressure on inflation. Since then, there have been more causes for concerns on the external front but the good news is inflation has been undershooting the RBI’s projections and the Indian economy is on a recovery path. In February, the MPC left the rate untouched as it felt that “the nascent recovery” needed to be “carefully nurtured” and growth should be “put on a sustainably higher path through conducive and stable macro-financial management”. Lower than projected retail inflation is likely to reinforce the belief. At least till June, RBI is unlikely to tinker with either the policy rate or its stance.
