Experts have advised the Reserve Bank of India to refrain from making quick decisions in response to the weak GDP growth figures for the second quarter of the current fiscal year. They also mentioned that an interest rate cut might be possible during the Monetary Policy Committee (MPC) meeting scheduled for February. This week, the Reserve Bank is expected to keep the repo rate at 6.5 percent for the eleventh consecutive time. Additionally, experts suggested that the Cash Reserve Ratio (CRR) could be lowered or that the deposit ratio with the central bank might be adjusted to improve liquidity.
The decision will be announced on December 6.
The six-member MPC, led by Reserve Bank Governor Shaktikanta Das, will meet from December 4 to 6, with the announcement of their decision on December 6. Most analysts have revised their GDP growth forecasts for the current fiscal year, with some predicting a decline to 6.3 percent, while the Reserve Bank continues to forecast 7.2 percent.
Experts from the State Bank of India believe that, given the second-quarter growth figures, there is no need to rush into cutting interest rates. They noted that although inflation is expected to decrease from November, it remains unstable.
A cut of 0.25 percent is possible.
However, experts indicated that the Reserve Bank needs to reevaluate its liquidity policy. Economists at Deutsche Bank also expect an interest rate cut in February and stressed that reducing the CRR during the upcoming monetary policy review would be appropriate.
According to HSBC economists, the MPC may lower the repo rate by 0.25 percent in its meetings in February and April. American brokerage firm BofA Global Research also stated that the Reserve Bank is likely to keep the repo rate at 6.5 percent on Friday, noting that headline inflation exceeds the target of 6 percent.