Retail inflation fell to a lowest point of 3.61% of 3.61% in February, mainly as a result of illuminating the prices of vegetables, eggs and other protein -rich articles, which created the RBI space to reduce interest rates next month. File | Photocredit: Reuters
The Reserve Bank of India (RBI) will probably again lower the most important interest rates this week with a maximum of 25 basic points, because lower inflation offers support for an accommodation monetary policy position, and there is an urgent need to stimulate growth at a time that the mutual rates announced by the US is a challenge for the challenge for the mouth.
In February, the Monetary Policy Committee of the RBI, led by Governor Sanjay Malhotra, lowered the Repo rate by 25 basic points to 6.25%. It was the first reduction since May 2020 and the first revision after two and a half years.
The 54th meeting of the MPC, the rate setting panel, is planned to start deliberations on 7 April and the decision will be announced on April 9, 2025.
The RBI has kept the repo percentage (short-term loan) since February 2023 unchanged at 6.5%.
Bank of Baroda Chief Economist Madan Sabnavis said that the credit policy announced this week will be announced at a time when several things are happening around the world and within the economy.
The new rates imposed by the US would have some impact on the growth prospects and the currency, something that the MPC will have to consider after the normal assessment of the state of the economy, he said.
“Although it seems that the circumstances are pretty clear for another 25 BPS reduction in the Repo rate this time with the inflation views that are benign and liquidity is located, it is also expected that the posture will change in accommodating, which means that there may be more speed reductions in the offing in the course of the year, Sabnavis said.
US President Donald Trump announced mutual rates on 2 April ranging from 11-49% in around 60 countries, including India and China. It will take effect from April 9, 2025.
There are challenges and opportunities for India, because many of his competitors in export, such as China Vietnam, Bangladesh, Cambodia and Thailand, are confronted according to experts.
Rating agency ICRA also expects the MPC to lower the rates with 25 BPS in its upcoming meeting while retaining a neutral attitude.
“Although the Liquidity Interventions of the Central Bank are likely to continue with the aim of compensating the upcoming drain resulting from the settlement of the short positions in its forward book and the duration of Long tenor VRRs (repo with variable rate), we do not expect important announcements in the MPCE -EMPENTIONS.
The recent announcements of liquidity injections are probably intended to push a faster transfer of rates, ICRA added.
In the meantime, Industrie-Body Assocham suggested that the coming monetary policy should take a wait-and-see attitude instead of going into a rate reduction at this stage.
“The RBI recently injected liquidity on the market through various measures … We must be patient for these measures to have an impact on Capex’s growth and consumption. Given this background, we believe that the RBI is expected to keep the rates stable during this policy cycle,” said Assocam President Sanjay Nayar.
He said that despite challenges on the external front, the Indian economy is expected to stay on a fixed foot in the new tax. The growth of GDP nearly 6.7% for the FY26 is a reasonable expectation, while the inflation of the retail trade probably remains under control.
Retail inflation fell to a lowest point of 3.61% of 3.61% in February, mainly as a result of illuminating the prices of vegetables, eggs and other protein -rich articles, which created the RBI space to reduce interest rates next month.
The index-based retail inflation on consumer price was 4.26% in January and 5.09% in February 2024. The previous low point was observed in July.
Pradep Aggarwal, founder and chairman, Signature Global (India) Limited, said that the Central Bank is expected to lower the Repo percentage by 25 basic points, so that it is brought to 6% to stimulate consumption and to stimulate economic growth.
“A lower policy percentage serves as a catalyst for increased loans, so that more individuals are encouraged to invest in home purchasing, stimulating the demand on the housing market,” he said.
However, the actual impact of this rate reduction will largely depend on how effective and quickly commercial banks transfer the policy decision of RBI to borrowers, Mr Aggarwal said.
In addition to the RBI governor, the MPC has two high officials from the Central Bank and three people appointed by the government.
Published – 06 April 2025 04:29 PM is
