The Reserve Bank of India (RBI) is set to hold its next Monetary Policy Committee (MPC) meeting from April 7-9, where it will review the current economic conditions and decide on policy rates. RBI Governor Sanjay Malhotra will announce the outcome on April 9 at 10 AM. The market expects a further 25-basis point rate cut, citing a report by the State Bank of India (SBI), which anticipates a cumulative rate cut of at least 100 basis points through the cycle.
Economists are divided on the expected rate cut. Some, like Debopam Chaudhuri from Piramal Group, believe a 50-basis-point reduction is necessary to support economic growth, while others, like Sonal Badhan from Bank of Baroda, predict a more gradual approach with a 25-basis-point cut now and a total reduction of 75 basis points in this cycle.
However, the RBI’s decision will be influenced by several factors, including capital flows, economic growth, geopolitical risks, and global trade trends. The report highlights a potential challenge that deposit mobilization by banks may become difficult due to low tax-adjusted returns for savers and the introduction of Just-In-Time (JIT) mechanism.
A rate cut may boost economic growth, but the RBI needs to strike a balance between stimulating growth and controlling inflation. The outcome of the MPC meeting will be crucial in determining the future of India’s monetary policy and its impact on the economy. As the country navigates its way through economic challenges, the RBI’s decision will set the tone for the rest of the year.