The Reserve Bank of India kept its policy rate unchanged at a near seven-year low of 6 percent on Wednesday despite a sharp slowdown in economic growth, after consumer inflation surged to a five-month high.
VARUN KHANDELWAL, MANAGING DIRECTOR, BULLERO CAPITAL, DELHI
“Chances of a rate cut in the next few months are extremely low. Without getting into value judgments on the sensibility of the MPC’s actions, it is quite clear from their refusal to cut rates despite a dramatic fall in inflation that they really do not want to cut. The impending tightening of monetary policy globally, easing in fiscal discipline, rise in commodity prices are all factors which will reinforce its hawkish stance further.”
“There isn’t much scope for increase in tensions between the government and the RBI. The finance ministry has already had consultations with MPC members and I am certain an exchange of views on ease/don’t ease has transpired. Short of firing the MPC and taking over the RBI, there isn’t really much that the government can do further about interest rates.”
TUSHAR ARORA, SENIOR ECONOMIST, HDFC BANK
“No surprises as such. Going strictly by the optics of headline inflation is unlikely to result in rate cuts. Room to maneuver will only come if the MPC chooses to utilize the +/-2 percent bandwidth and indeed looks through a marginal rise in inflation above the 4 percent level. I believe this could happen later during the year as growth numbers continue to surprise on the downside.”
UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK
”I don’t see much of a surprise. RBI has highlighted risks from inflation which were known. Going ahead the room for further action looks very limited. But we do not completely rule out a possible rate cut in upcoming policy, considering factors like growth which isn’t particularly robust as of now.
“We believe that RBI will stay on status quo for the rest of the year. RBI and government don’t have different objectives, although their means could be different. I don’t see any increased tensions between them.”
SUNIL SINHA, DIRECTOR, INDIA RATINGS, NEW DELHI
“In my view, another rate cut this fiscal is unlikely unless retail inflation surprises on the downside and inflation levels turn out to be lower than the central bank’s expectations.”
“The government would obviously want the RBI to have a closer look on the economic growth and accordingly reduce the policy rate as the GDP growth rate is dwindling but the central bank’s focus is not only to keep an eye on current inflation levels but to also check inflationary expectations - that is where the conflict between the government and the RBI lies.”
SUDHAKAR P., HEAD OF RESEARCH, WILLIAM O‘NEIL, BANGALORE
“I definitely feel that pressure from the government is going to mount on RBI to cut rates now, considering many things have not gone well for the government. Economic growth has been really slow. Inflation and global uncertainties are all causes for concern. Somewhere down the line the RBI will consider a rate cut, likely in December.”
KAPIL GUPTA, ECONOMIST, EDELWEISS SECURITIES, MUMBAI
“We are expecting a further rate cut of 25 bps during the rest of the fiscal. The timing of this rate cut will of course depend on various factors including inflation trajectory while the dollar movement and the U.S. Federal Reserve actions will also be critical.”
ANITA GANDHI, DIRECTOR, ARIHANT CAPITAL MARKETS, MUMBAI
“In its last policy review in August, the RBI had reduced the repo rate, citing reduction in inflation risks. However, retail inflation rose to a five-month high of 3.36 per cent in August due to costlier vegetables and fruits. Considering that the economy needs immediate measures for revival of growth, at least 2 to 3 rate cuts of 25 bps can be expected going ahead.”
“I do not expect increased tensions between the RBI and the government over policy. Ideally speaking RBI is required to act as an independent entity in the best interest of the nation.”
SAMRAT DASGUPTA, CEO, ESQUIRE CAPITAL, MUMBAI
“I think inflation is inching up a little and with the U.S. also tightening liquidity, the probability for a rate cut, is very low. A maximum of 25 bps is possible, if U.S. says they won’t crunch liquidity anymore.”
“I think government and the central bank is in sync. They know its difficult to cut rate beyond this without harming the rupee.”...