Reserve bank of india
The Reserve Bank of India (RBI) will announce its next by-floor policy on 1 October. Meanwhile, a research report by State Bank of India (SBI) estimates that the Reserve Bank may cut the rate of 25 basis points (0.25%). The report says that in the coming time, control of retail inflation will remain, so this step will be beneficial for the economy.
RBI meeting and current situation
The Monetary Policy Committee (MPC) headed by RBI Governor Sanjay Malhotra will hold a three -day meeting from Monday. This meeting is taking place at a time when geopolitical tension has increased internationally and the US has imposed 50% tariff on Indian exports. The final decision will be declared on 1 October
Significantly, since February till now, RBI had cut 100 basis points in three phases, but instead of any change in the August meeting, the policy of “weight and watch” was adopted.
Different opinions of experts
Madan Sabnavis, Chief Economist of Bank of Baroda, says that inflation is already below the target of 4% and the country’s economic growth rate is expected to be above 6.5%. In such a situation, the rate cut is not yet needed, although further steps can be taken to keep investors’ sentiments positive and stabilize bond yields.
According to ICRA Chief Economist Aditi Nair, the recent GST rationalization may decline in inflation in October-November, but after that the trend will go up again. Therefore, there is a possibility of status quo (no change) in the October policy.
Crisil Chief Economist Dharmakirti Joshi says that inflation is less than expected and core inflation is historically below. Changes in GST rates will also reduce inflation. Apart from this, the RBI gets flexibility in the policy recently by the US Federal Reserve due to the cut of 25 basis points and the possibility of further cut. Mandar Pitale of SBM Bank India said that at the moment RBI may have maintained “status quo” and took further steps after seeing the situation in the December meeting.
Relief from GST change
The GST structure has changed into two-tier since 22 September. Now only 5% and 18% rates are applicable. This simple structure has been applied by combining the earlier 5%, 12%, 18% and 28% rates. Due to this, 99% of everyday items have become cheap and inflation is expected to be further controlled.