The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, has begun its two-day meet in Mumbai. At the end of the meeting on December 6, the panel will come out with its fifth bi-monthly monetary policy statement for 2017-18.
In its October review, the panel had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 per cent for the current fiscal. The central bank had reduced the benchmark lending rate by 0.25 percentage points to 6 per cent in August, bringing it to a 6-year low.
Experts say Reserve Bank is likely to keep the key rate unchanged and stay focused on inflation control as the rebound in September quarter GDP growth eased pressure on it to lower rates, experts said.
India Inc, however, is demanding interest rate cut to further build on positive sentiment generated by the rebound and upgrade of the country’s sovereign rating by Moody’s.
Reversing a five-quarter slide in GDP growth, Indian economy bounced back from a three-year low to expand by 6.3 per cent in the July-September period as manufacturing revved up and businesses adjusted to the new GST tax regime.
The GDP growth in the second quarter of 2017-18 compares to 5.7 per cent in April-June. Credit rating firm ICRA has said RBI is likely to keep the key policy rate unchanged at 6 per cent as it expects retail inflation to firm up in the coming months.
It said the (MPC) would leave the repo rate unchanged at 6 per cent “in a non-unanimous decision in the December 2017 policy review, given the expectation of a further rise in the CPI inflation in the coming months”.
With gross value added (GVA) growth estimated by the Central Statistics Office at 5.8 per cent in first half of FY’18, a downward bias is likely to be placed on the MPC’s baseline forecast for growth of GVA at basic prices of 6.7 per cent for ongoing fiscal.
(With inputs from agencies)