The Reserve Bank of India (RBI) can once again cut the major policy rate repo by up to 0.25 percent in its monetary review meeting this week. Due to reduction in inflation, the central bank has scope to cut interest rate. After the announcement of the US imposition of counter custody, challenges have arisen before the global economy. In such a situation, the need to encourage economic growth is also being felt on the domestic front.
In February, the RBI Monetary Policy Committee (MPC) headed by Governor Sanjay Malhotra reduced the repo rate to 6.25 percent. This was the first cut in repo rate after May, 2020 and the first amendment after two and a half years. The 54th meeting of MPC will start from April 7. The results of the meeting will be announced on April 9.
These people will be involved in RBI’s MPC meeting
Apart from RBI Governor, MPC consists of two senior officials of the central bank and three people appointed by the government. The Reserve Bank of India (RBI) had kept the repo rate (short -term lending rate) unchanged from February 2023 at 6.5 percent. The last time the RBI had reduced the repo rate at the time of Kovid (May, 2020) and after that it was gradually increased to 6.5 percent.
Bank of Baroda (Bob) chief economist Madan Sabanvis said that the policy announced this week will come at a time when many things are happening within the whole world and economy. He said that the fees levied by the US will have some impact on the possibilities and currency, on which the MPC would have to consider beyond the general assessment of the economy status.
Although the possibilities of inflation seem to be softened and stable of liquidity, this time the repo rate may be reduced by 0.25 percent. It is also expected that the central bank will more generous its stance, which means that the rates will be further cut during this year.
Trump imposed tariffs on 60 countries
US President Donald Trump has imposed counter -4 to 49 percent counter -duty on about 60 countries including India and China on April 2, which will be applicable from April 9. According to experts, there are both challenges and opportunities for India as many of its competitive countries such as China, Vietnam, Bangladesh, Cambodia and Thailand are facing high charges.
The rating agency Iqra also hopes that the MPC will cut the repo rate by fourth percent in its upcoming meeting. Iqra said, we do not expect any major announcement like cut in cash reserved ratio (CRR) in MPC meeting.
The president of Assocham said this
Meanwhile, Industry Board Assocham has suggested that MPC should take the stand of look and wait instead of cutting the rate in the current monetary policy. Assocham President Sanjay Nair said, RBI has recently increased liquidity in the market through various measures. We have to be patient even to the increase in capital expenditure of these measures and impact on consumption. We believe that the RBI will keep the repo rate stable during this eternal cycle.
He said that despite the challenges on the external front, the Indian economy is expected to be in a strong position in the new financial year. For FY 2025-26, the gross domestic product (GDP) growth is an appropriate hope of about 6.7 percent, while retail inflation is likely to remain under control. Retail inflation has come to a seven -month low of 3.61 percent in February, mainly due to a decrease in prices of vegetables, eggs and other protein -rich goods.
The consumer price index based retail inflation was 4.26 percent in January and 5.09 percent in February 2024. Pradeep Aggarwal, founder and chairman of Signature Global (India) Limited, said that the repo rate is expected to be reduced to six percent by cutting a repo rate to six percent to promote consumption by the central bank and to speed up economic growth.
He said, a reduction in policy rate plays the role of a catalyst in taking loans, which encourage more people to invest to buy a house, which increases demand in the housing market. However, Aggarwal said that the actual impact of this rate cut will depend to a large extent on how effectively and rapidly to the customers of the commercial banks.